CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2020
EMPRESAS CMPC S.A. AND SUBSIDIARIES In thousands of United States Dollars (ThUS$)
This document contents:
• Report of Independent Auditors • Consolidated Statement of Financial Position • Statement of Changes in Equity • Consolidated Statements of Comprehensive Income • Consolidated Statement of Cash Flows • Notes to the Consolidated Financial Statements
Independent Auditors' Report
The Shareholders and Directors Empresas CMPC S.A.:
We have audited the accompanying consolidated financial statements of Empresas CMPC S.A. and its Subsidiaries, which comprise the consolidated statements of financial position as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.
Management’s responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Auditing Standards Generally Accepted in Chile. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
© KPMG Auditores Consultores SpA, a Chilean joint-stock company and a member firm of the KPMG network of Santiago independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Isidora Goyenechea 3520 All rights reserved. Piso 2, Las Condes +56 2 2997 1000 [email protected] Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Empresas CPMC S.A. and its Subsidiaries as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with International Financial Reporting Standards.
Cristián Bastián E. KPMG SpA
Santiago, March 4, 2021
© KPMG Auditores Consultores SpA, a Chilean joint-stock company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statements
INDEX
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ...... 4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...... 5 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ...... 6 CONSOLIDATED STATEMENT OF CASH FLOWS (DIRECT METHOD) ...... 8 NOTE 1 - CORPORATE INFORMATION ...... 9 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...... 14 2.1. Basis of preparation...... 15 2.2. Basis of presentation ...... 15 2.3. Financial information by segment reporting ...... 16 2.4. Foreign currency transactions...... 17 2.5. Business combinations ...... 19 2.6. Property, plant and equipment...... 20 2.7. Biologica l assets (forest pla ntations) ...... 21 2.8. Intangible assets ...... 22 2.9. Goodwill ...... 23 2.10. Impairment losses on non-fina ncia l assets ...... 24 2.11. Financia l instruments ...... 24 2.12. Hedging Instruments ...... 25 2.13. Inventory ...... 27 2.14. Trade and other accounts receivable ...... 28 2.15. Cash and cash e quivalents ...... 28 2.16. Issued capital ...... 29 2.17. Trade and other accounts payable ...... 29 2.18. Interest-bearing loans ...... 29 2.19. Current and deferred Income taxes ...... 29 2.20. Employee be nefits ...... 30 2.21. Provisions...... 30 2.22. Revenue recognition ...... 31 2.23. Leases...... 32 2.24. Divide nds distributed ...... 34 2.25. Environment ...... 34 2.26. Research and developme nt ...... 35 2.27. Advertising expenses ...... 35 2.28. Earnings per share ...... 35 2.29. Insurance expenses for goods and services ...... 35 NOTE 3 – RISK MANAGEMENT...... 36 NOTE 4 - ACCOUNTING ESTIMATES AND JUDGMENT...... 49 NOTE 5 – CHANGES IN ACCOUNTING POLICIES ...... 53 NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS ...... 53 NOTE 7 - FINANCIAL SEGMENT REPORTING ...... 54 NOTE 8 – FINANCIAL ASSETS ...... 62
2 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statements
NOTE 9 - OTHER NON-FINANCIAL ASSETS ...... 70 NOTE 10 - TRADE AND OTHER ACCOUNTS RECEIVABLE...... 71 NOTE 11 - ACCOUNTS RECEIVABLE FROM RELATED PARTIES...... 75 NOTE 12 - INVENTORY...... 76 NOTE 13 – BIOLOGICAL ASSETS...... 77 NOTE 14 - CURRENT AND NON-CURRENT TAX ASSETS AND LIABILITIES ...... 82 NOTE 15 - BUSINESS COMBINATIONS ...... 84 NOTE 16 - INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD ...... 85 NOTE 17 - INTANGIBLE ASSETS OTHER THAN GOODWILL ...... 87 NOTE 18 - GOODWILL ...... 87 NOTE 19 - PROPERTY, PLANT AND EQUIPMENT...... 89 NOTE 20 - LEASES ...... 92 NOTE 21 - DEFERRED TAXES ...... 96 NOTE 22 - OTHER FINANCIAL LIABILITIES ...... 99 NOTE 23 - TRADE AND OTHER ACCOUNTS PAYABLE ...... 120 NOTE 24 - ACCOUNTS PAYABLE TO RELATED PARTIES ...... 123 NOTE 25 – PROVISIONS AND CONTINGENT ASSETS AND LIABILITIES ...... 124 NOTE 26 - EMPLOYEE BENEFITS PROVISIONS ...... 132 NOTE 27 - OTHER NON-FINANCIAL LIABILITIES ...... 135 NOTE 28 - EQUITY...... 136 NOTE 29 - REVENUE ...... 143 NOTE 30 - OTHER PROFIT (LOSS) ...... 145 NOTE 31 - FINANCE COSTS ...... 145 NOTE 33 - INCOME TAX EXPENSE ...... 153 NOTE 34 - EXPENSES BY NATURE ...... 156 NOTE 35 – COMMITMENTS ...... 157 NOTE 36 - SHAREHOLDER AND TRANSACTIONS WITH RELATED PARTIES ...... 158 NOTE 37 – CONSOLIDATED FINANCIAL STATEMENTS...... 163 NOTE 38 - ENVIROMENT...... 165 NOTE 39 - SUBSEQUENT EVENTS AFTER THE REPORTING PERIOD ...... 167
3 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION As of As of December 31, December 31, 2020 2019 Note N° ThUS$ ThUS$ Assets Current assets Cash and cash equivalents 8.1 891,031 615,038 Other financial assets 8.2 5,567 4,563 Other non financial assets 9 169,082 140,273 Trade and other accounts receivable 10.1 839,909 852,770 Accounts receivable from related parties 11 2,327 1,091 Inventory 12 1,211,768 1,280,141 Biological assets 13 330,094 321,317 Current tax assets 14 127,880 239,030 Total current assets 3,577,658 3,454,223 Non-current assets Other financial assets 8.3 69,376 14,278 Other non-financial assets 9 172,656 181,749 Non-current accounts receivable 10.1 10,606 39,053 Investments accounted for using the equity method 16 1,471 502 Intangible assets other than goodwill 17 107,934 125,250 Goodwill 18 211,318 250,513 Property, plant and equipment 19 7,290,523 7,637,801 Biological assets 13 3,041,699 3,041,258 Right-of-use assets 20 147,656 170,815 Non-current current tax assets 14 14,996 940 Deferred tax assets 21 81,060 39,414 Total non-current assets 11,149,295 11,501,573 Total assets 14,726,953 14,955,796
Liabilities and shareholders' equity Liabilities Current liabilities Other financial liabilities 22 262,890 512,847 Liabilities for current operating leases 20 21,700 22,949 Trade and other accounts payable 23 736,348 814,273 Accounts payable to related parties 24 5,140 1,005 Other current provisions 25 1,828 4,465 Current tax liabilities 14 41,680 24,804 Employee benefits provisions 26 81,814 76,580 Other non-financial liabilities 27 43,648 68,147 Total current liabilities 1,195,048 1,525,070 Non-current liabilities Other financial liabilities 22 3,780,959 3,432,197 Liabilities for non-current operating leases 20 141,574 168,762 Other non-current provisions 25 15,954 8,605 Deferred tax liabilities 21 1,594,271 1,598,412 Employee benefits provisions 26 86,131 80,181 Other non-financial liabilities 27 46,879 6,994 Total non-current liabilities 5,665,768 5,295,151 Total liabilities 6,860,816 6,820,221 Shareholders' equity Issued capital 28.1 1,453,728 1,453,728 Retained earnings 28.3 7,135,232 7,154,299 Other reserves 28.2 (725,671) (474,717) Shareholders' equity attributable to owners of the parent 7,863,289 8,133,310 Non-controlling interest 28.5 2,848 2,265 Total shareholders' equity 7,866,137 8,135,575 Total shareholders' equity and liabilities 14,726,953 14,955,796
The accompanying notes form an integral part of the Consolidated Financial Statements.
4 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Actuarial profits or Currency Cash flow (losse s) on Other Equity translation translation defined miscellane Retained attributable Issue d differences differences benefit plan ous Other earnings to owners of Non-controlling Total capital reserve reserve reserves reserves reserves (losse s) the parent interest equity Note 28.1 Note 28.2 Note 28.3 Note 28.5 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ For the period ended as of December 31, 2020 Current period beginning balance 1/1/2020 1,453,728 (720,531) 27,230 (30,465) 249,049 (474,717) 7,154,299 8,133,310 2,265 8,135,575 Changes in equity Comprehensive income Profit (loss) ------(28,366) (28,366) 700 (27,666) Other comprehensive income - (234,606) (16,943) 588 7 (250,954) - (250,954) (21) (250,975) Comprehensive income - (234,606) (16,943) 588 7 (250,954) (28,366) (279,320) 679 (278,641) Dividends (1) ------9,299 9,299 - 9,299 Increase (decrease) due to transfers and other changes ------(96) (96) Total changes in equity - (234,606) (16,943) 588 7 (250,954) (19,067) (270,021) 583 (269,438) Ending balance as of 12/31/2020 1,453,728 (955,137) 10,287 (29,877) 249,056 (725,671) 7,135,232 7,863,289 2,848 7,866,137
For the period ended as of December 31, 2019 Current period beginning balance 1/1/2019 1,453,728 (624,398) 29,439 (23,430) 249,194 (369,195) 7,157,302 8,241,835 2,183 8,244,018 Increase (decrease) due to changes in accounting policies ------(31,041) (31,041) - (31,041) Restated beginning balance 1,453,728 (624,398) 29,439 (23,430) 249,194 (369,195) 7,126,261 8,210,794 2,183 8,212,977 Changes in equity Comprehensive income Profit (loss) ------84,492 84,492 (101) 84,391 Other comprehensive income - (96,133) (2,209) (7,035) (145) (105,522) - (105,522) (14) (105,536) Comprehensive income - (96,133) (2,209) (7,035) (145) (105,522) 84,492 (21,030) (115) (21,145) Dividends ------(56,454) (56,454) - (56,454) Increase (decrease) due to transfers and other changes ------197 197 Total changes in equity - (96,133) (2,209) (7,035) (145) (105,522) 28,038 (77,484) 82 (77,402) Ending balance as of 12/31/2019 1,453,728 (720,531) 27,230 (30,465) 249,049 (474,717) 7,154,299 8,133,310 2,265 8,135,575 The accompanying notes form an integral part of the Consolidated Financial Statements.
(1) At the Shareholders' Meeting dated April 30, 2020, the distribution of a dividend of 30.9% of the net distributable profit for the year 2019 was approved. As a result, an adjustment was made to the Provision for Dividends recorded as of December 31, 2019. As of December 31, 2020, the Company recorded a Provision for Dividends of ThUS $ 3,586, which has been calculated in accordance with the Company's dividend policy currently in force.
5 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the period ended as of December 31, 2020 2019 Note N° ThUS$ ThUS$ Income Statement, by function of expenditure Profit (loss) Revenue 29 5,286,927 5,670,277 Cost of sales (4,423,499) (4,562,448) Gross profit 863,428 1,107,829 Other income, by function 13 144,449 118,155 Distribution costs (242,309) (247,731) Administrative expenses (294,425) (323,988) Other expenses, by function (203,079) (219,367) Other Income (expense) 30 (50,286) (70,284) Operating profit 217,778 364,614 Finance income 10,270 20,703 Finance costs 31 (200,911) (195,350) Share in profit (loss) of associates and joint ventures accounted for using the equity 16 910 (9) method Foreign currency translation differences 32 (29,267) (8,801) Gain (loss) from indexation units 32 52,876 40,105 Profit, before taxes 51,656 221,262 Income tax expense 33 (79,322) (136,871) Profit (loss), from continuing operations (27,666) 84,391 Profit (loss) (27,666) 84,391 Profit (loss) attributable to Profit (loss) attributable to owners of the parent (28,366) 84,492 Profit (loss) attributable to non-controlling interest 28.5 700 (101) Profit (loss) for the period (27,666) 84,391
Earnings per share Basic earnings per share Basic profit (loss) per share from continuing operations (US$ per share) 28.4 (0.0113) 0.0338 Basic profit per (loss) share from discontinuing operations (US$ per share) - - Basic profit (loss) per share (0.0113) 0.0338 Diluted earnings per share Diluted profit (loss) per share from continuing operations (US$ per share) 28.4 (0.0113) 0.0338 Diluted profit (loss) per share from discontinuing operations (US$ per share) - - Diluted profit (loss) per share (0.0113) 0.0338
The accompanying notes form an integral part of the Consolidated Financial Statements.
6 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (continued)
For the period ended as of December 31, 2020 2019 ThUS$ ThUS$ Comprehensive income statement Profit (loss) (27,666) 84,391 Other comprehensive income Components of other comprehensive income that will not be reclassified to income for the period, before taxes Other comprehensive income, before taxes, gain (losses) on new measurement of 419 (8,758) defined benefits plans Other comprehensive income that will not be reclassified to income for the 419 (8,758) period, before taxes Components of other comprehensive income that will be reclassified to income for the period, before taxes Foreign currency translation differences Profit (losses) on foreign currency translation differences, before taxes (234,624) (96,133) Other comprehensive income, before taxes, foreign currency translation (234,624) (96,133) differences Cash flow hedging - Profit (losses) on cash flow hedging, before taxes (23,460) (3,636) Other comprehensive income (loss), before taxes, cash flow hedging (23,460) (3,636) Share of other comprehensive income (loss) of associates and joint ventures accounted for using the equity method that will be reclassified to income for the 4 (159) period, before taxes Other comprehensive income that will be reclassified to income for the (258,080) (99,928) period, before taxes Income taxes related to components of other comprehensive income that will not be reclassified to income for the period Income taxes related to new measurements of defined benefits plans of other 169 1,723 comprehensive income Income taxes related to components of other comprehensive income that 169 1,723 will not be reclassified to income for the period Income taxes related to components of other comprehensive income that will be reclassified to income for the period Income tax related to cash flow hedges of other comprehensive income 6,517 1,427 Income taxes related to components of other comprehensive income (loss) 6,517 1,427 that will be reclassified to income for the period Other comprehensive income (250,975) (105,536) Comprehensive income (278,641) (21,145)
Comprehensive income attributable to: Comprehensive income attributable to owners of the parent (279,320) (21,030) Comprehensive income attributable to non-controlling interest 679 (115) Comprehensive income (278,641) (21,145)
The accompanying notes form an integral part of the Consolidated Financial Statements.
7 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
CONSOLIDATED STATEMENT OF CASH FLOWS (DIRECT METHOD)
For the period ended as of December 31, 2020 2019 Note N° ThUS$ ThUS$ Statement of cash flows Cash flows provided by (used in) operating activities Proceeds from operating activities Proceeds from goods sold and services rendered 5,790,654 6,313,933 Proceeds of premiums and services, annuities and other benefits from policies subscribed 14,218 9,077 Other proceeds from operating activities 203,760 264,867 Payments to operating activities Payments to suppliers for goods and services (4,552,547) (4,827,179) Payments to and on account of employees (470,081) (466,270) Payments of premiums and services, annuities and other obligations on policies (43,153) (30,420) subscribed Other operating activity payments (196,389) (191,940) Net cash flows provided by (used in) operating activities 746,462 1,072,068 Income taxes paid 6,173 (403,014) Net cash flows provided by (used in) operating activities 752,635 669,054 Cash flows provided by (used in) investing activities Cash flows used to obtain control of subsidiaries or other businesses (12,438) (341,320) Proceeds from disposal of property, plant and equipment 1 94 Additions to property, plant and equipment (167,338) (248,060) Additions to intangible assets - (3,998) Additions to other non current assets (163,681) (169,679) Interest received 8,852 19,655 Other cash inflows (outflows) 2,870 30,244 Net cash flows provided by (used in) investing activities (331,734) (713,064) Cash flows provided by (used in) financing activities Proceeds from loans 1,486,867 602,178 Proceeds from non-current loans 22.3 492,611 207,319 Proceeds from current loans 22.3 994,256 394,859 Loans reimbursement 22.3 (1,421,919) (511,501) Financial lease payments 22.3 (18,272) (18,720) Dividends paid (16,730) (202,883) Interests paid 22.3 (174,886) (166,084) Other cash inflows (outflows) (3,857) (4,122) Net cash flows provided by (used in) financing activities (148,797) (301,132) Net increase (decrease) in cash and cash equivalents, before the effect of changes in 272,104 (345,142) the exchange rate Effects of changes in the exchange rate on cash and cash equivalents Effects of changes in the exchange rate on cash and cash equivalents 3,889 (7,324) Net increase in cash and cash equivalents 275,993 (352,466) Cash and cash equivalents at beginning of the period 8 615,038 967,504 Cash and cash equivalents at the end of the period 8 891,031 615,038
The accompanying notes form an integral part of the Consolidated Financial Statements.
8 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2020
NOTE 1 - CORPORATE INFORMATION
Empresas CMPC S.A., the parent company, was incorporated in Chile in 1920 with a legal form of a Corporation (S.A.) and is subject to the Chilean Corporations Act (Law No. 18,046 dated October 22 of 1981). Empresas CMPC S.A. is listed in the Chilean Financial Markets Commission (hereinafter the “CMF” in Spanish) under number 0115. For Chilean tax purposes, its tax identification number is 90.222.000-3.
The Company is controlled by the Matte Group by having a direct and indirect share interest through its investments in Empresas CMPC S.A. Please see Note 36 for the list of shareholders of the Company.
The head office of Empresas CMPC S.A. is domiciled at Agustinas 1343, Santiago, Chile, telephone (56-2) 24412000.
CMPC along with its consolidated subsidiaries (collectively, the “CMPC” or “Empresas CMPC”) is one of the leading forestry companies in Latin America and participates in multiple segments within that industry. Its production and commercial activities are carried out across three business segments: Pulp, Biopackaging and Softys. The Company is responsible for strategic management of the subsidiaries and provides administrative, financial support services and relationship with external entities.
The Company has over 654,000 hectares of forest plantations, mainly pine and eucalyptus, of which 459,000 hectares are located in Chile, 141,000 hectares in Brazil and 54,000 hectares in Argentina. The Company also has usufruct, sharecropping and lease contracts with third parties covering 106,000 hectares of forest plantations distributed in Chile and Brazil.
The Company has 46 manufacturing plants distributed in Chile, Argentina, Peru, Uruguay, Mexico, Colombia, Brazil and Ecuador. CMPC primarily sells to Chile, Asia, Europe, Argentina and Brazil. As of December 31, 2020 and December 31, 2019 the 81% of the Company’s consolidated revenue is generated by exports by its foreign subsidiaries and approximately 19% is generated in Chile. CMPC also has subsidiaries for commercial and financial operations in Europe, the United States and the Cayman Islands and a foundation (CMPC Foundation) whose mission is to strengthen the education and culture of the communities where CMPC has a presence.
As of December 31, 2020, the CMPC Group consists of 60 entities: Empresas CMPC S.A., the parent company, 54 subsidiaries and 3 associates and 2 joint ventures. CMPC has consolidated in its financial statements the results of all companies over which it has control and has applied the equity method of accounting on entities in which it exercises significant influence. Total assets of the Parent Company as of December 31, 2020, amounted ThUS$8,008,228 (ThUS$8,499,857 as of December 31, 2019).
Additionally, in 2020 a representative office is incorporated in Shanghai, China, whose purpose is to strengthen the Company's commercial network in the main country of destination of its exports. This office will operate through the subsidiary CMPC Pulp SpA.
9 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The subsidiaries included in these consolidated financial statements are detailed as follows:
P e r c e n t a g e o f p a r t i c i p a t i o n Taxpayer Country of Functional Consolidated companies As of December 31, 2020 As of December 31, 2019 No. origin Currency Direct Indirect Total Direct Indirect Total Inversiones CMPC S.A. 96.596.540-8 Chile US$ 99.9988 0.0012 100.0000 99.9988 0.0012 100.0000 Inmobiliaria Pinares SpA 78.000.190-9 Chile US$ 99.9900 0.0100 100.0000 99.9900 0.0100 100.0000 CMPC Celulosa S.A. 76.600.628-0 Chile US$ 48.0663 51.9337 100.0000 48.0663 51.9337 100.0000 CMPC Papeles S.A. 96.757.710-3 Chile US$ 0.1000 99.9000 100.0000 0.1000 99.9000 100.0000 CMPC Tissue S.A. 96.529.310-8 Chile CLP 0.0426 99.9574 100.0000 0.0497 99.9503 100.0000 CMPC Pulp SpA 96.532.330-9 Chile US$ 7.3883 92.6117 100.0000 7.3883 92.6117 100.0000 Forestal Mininco SpA 91.440.000-7 Chile US$ 5.3042 94.6824 99.9866 5.3042 94.6824 99.9866 CMPC Maderas SpA 95.304.000-K Chile US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Cooperativa Agrícola y Forestal El Proboste Ltda. 70.029.300-9 Chile US$ 0.0000 75.9234 75.9234 0.0000 75.9234 75.9234 Bioenergías Forestales SpA 76.188.197-3 Chile US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Inmobiliaria y Constructora San Roque SpA 76.395.604-0 Chile US$ 0.0000 99.9866 99.9866 0.0000 99.9866 99.9866 Cartulinas CMPC SpA 96.731.890-6 Chile US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Papeles Cordillera SpA 96.853.150-6 Chile US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Forsac SpA 79.943.600-0 Chile US$ 0.0128 99.9872 100.0000 0.0177 99.9823 100.0000 Empresa Distribuidora de Papeles y Cartones SpA88.566.900-K Chile US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Envases Impresos SpA 89.201.400-0 Chile US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Chilena de Moldeados SpA 93.658.000-9 Chile US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Sociedad Recuperadora de Papel SpA 86.359.300-K Chile US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Inversiones Protisa SpA 96.850.760-5 Chile CLP 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 CMPC Papeles Tissue S.A. 77.054.086-0 Chile US$ 0.1000 99.9000 100.0000 0.1000 99.9000 100.0000 CMPC Papeles Forestal S.A. 77.054.083-6 Chile US$ 0.1000 99.9000 100.0000 0.1000 99.9000 100.0000 CMPC Ventures SpA 77.194.029-3 Chile US$ 100.0000 0.0000 100.0000 0.0000 0.0000 0.0000 CMPC Inversiones de Argentina S.A. Foreign Argentina ARS 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Forestal Bosques del Plata S.A. Foreign Argentina US$ 0.0000 99.9879 99.9879 0.0000 99.9879 99.9879 Forestal Timbauva S.A. Foreign Argentina US$ 0.0000 99.9879 99.9879 0.0000 99.9879 99.9879 Naschel S.A. Foreign Argentina ARS 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Fabi Bolsas Industriales S.A. Foreign Argentina US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 La Papelera del Plata S.A. Foreign Argentina ARS 0.0000 99.9919 99.9919 0.0000 99.9906 99.9906 Melhoramentos CMPC Ltda. Foreign Brazil BRL 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Sepac - Serrados e Pasta e Celulose Ltda. Foreign Brazil BRL 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 CMPC Celulose Riograndense Ltda. Foreign Brazil US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 CMPC Riograndense Ltda. Foreign Brazil US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Guaíba Administração Florestal Ltda. Foreign Brazil US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 CMPC Investments Ltd. Foreign Channel Islands US$ 0.0000 0.0000 0.0000 0.0000 100.0000 100.0000 Drypers Andina S.A. Foreign Colombia COP 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Protisa Colombia S.A. Foreign Colombia COP 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Productos Tissue del Ecuador S.A. Foreign Ecuador US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 CMPC Europe Ltd. Foreign England US$ 0.0000 99.9866 99.9866 0.0000 99.9866 99.9866 Inversiones CMPC Cayman Ltd. Foreign Cayman Islands US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Grupo ABS Internacional S.A. de C.V. Foreign Mexico M XN 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Absormex S.A. de C.V. Foreign Mexico M XN 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Convertidora de Productos Higiénicos S.A. de C.V Foreign Mexico M XN 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Convertidora CMPC México S.A. de C.V. Foreign Mexico M XN 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Absormex CMPC Tissue S.A. de C.V. Foreign Mexico M XN 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Forsac México S.A. de C.V. Foreign Mexico US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 CMPC Maderas México S.A. de C.V. Foreign Mexico US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Productos Tissue del Perú S.A. Foreign Peru PEN 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Forsac Perú S.A. Foreign Peru US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Softys Arequipa S.A.C. Foreign Peru PEN 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Activar S.A.C. Foreign Peru PEN 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Papelera Panamericana S.A. Foreign Peru PEN 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 CMPC Tissue Perú S.A.C. Foreign Peru PEN 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Propa Perú S.A.C. Foreign Peru US$ 0.0000 100.0000 100.0000 0.0000 100.0000 100.0000 Industria Papelera Uruguaya S.A. Foreign Uruguay UYU 0.0000 99.7269 99.7269 0.0000 99.7269 99.7269 CMPC USA Inc. Foreign United States US$ 0.0000 99.9999 99.9999 0.0000 99.9999 99.9999
CMPC’s subsidiary Inversiones CMPC S.A. is registered in the CMF under number 0672 and prepares consolidated financial statements, which are available to the public. The accounting policies followed are consistent with those applied by CMPC in the preparation of its consolidated financial statements.
The following changes have occurred in the share percentage and capital contributions of the following subsidiaries included in consolidation:
(1) During the year 2019 the share capital of the subsidiary Drypers Andina S.A. from Colombia was increased by ThUS$1,000, paid by shareholders CMPC Tissue S.A. 70.00%, Inversiones Protisa SpA 29.70%, Inversiones CMPC S.A and other subsidiaries 0.30%.
10 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(2) At the extraordinary shareholders’ meeting of the subsidiary Industria Papelera Uruguaya S.A., held on February 20, 2019, it was agreed to carry out a capital increase of ThUS$14,156 through the capitalization of funds previously deposited by its main shareholder Inversiones Protisa SpA. The new participation on this society is equivalent to 99.73%.
(3) By public deed of March 9, 2019, extended before the public notary of Lima, Mr. Eduardo Laos de Lama, Softys Arequipa S.A.C. was established. At the general meeting of shareholders of the subsidiary, held on March 27, 2019, it was agreed to increase the share capital of Softys Arequipa S.A.C., totaling an amount of ThUS$14,500 subscribed and paid by its shareholders CMPC Tissue S.A. 99.999998% and Productos Tissue del Perú S.A. 0.000002%.
(4) On April 5, 2019 the subsidiary Softys Arequipa S.A.C. acquired 100% of the shares of Activar S.A.C. y Papelera Panamericana S.A. As a result of this operation, the financial statements of both subsidiaries are consolidated, whose shareholders are Softys Arequipa S.A.C. 100% for Activar S.A.C. and Softys Arequipa S.A.C. 44.98% with Activar S.A.C. 55.02% for Papelera Panamericana S.A.
(5) By public deeds dated June 7, 2019, the sale and purchase agreements of participation fees on the subsidiary Cooperativa Agrícola y Forestal El Proboste Ltda. was acquired. As a result of this operation, the new shareholders of the Cooperativa are CMPC Maderas SpA 18.69%, Forestal Mininco SpA 19.60%, CMPC Pulp SpA 18.88% and Inmobiliaria Pinares SpA 18.76%.
(6) On August 20, 2019 the subsidiary Softys Arequipa S.A.C. transferred 1 share of the share capital of Activar S.A.C. to CMPC Tissue S.A. This avoids the full dissolution of the acquired company. The new shareholders are Softys Arequipa S.A.C. that holds 99.99% and CMPC Tissue S.A. that holds 0.01% of the shares.
(7) At the extraordinary shareholders’ meeting of the subsidiary CMPC Tissue S.A. held on October 17, 2019, it was agreed to carry out a capital increase of ThUS$22,723 through the contribution of real estate domain and credits or accounts receivable at that date were owned by Inversiones CMPC S.A. As a result of this operation, the shareholder Inversiones CMPC S.A. subscribe all the shares of the new issue, and new shareholders are Empresas CMPC S.A that holds 0.08%, CMPC Papeles Tissue S.A. that holds 2.14% and Inversiones CMPC S.A. that holds 97.78%.
(8) On October 30, 2019 the subsidiary CMPC Tissue S.A. performed a capital increase that was fully subscribed by its shareholder Inversiones CMPC S.A. As a result of this operation, the capital stock of CMPC Tissue S.A. was increased in a total of ThUS$330,121 and consequently the new shareholders are Empresas CMPC S.A. 0.05%, CMPC Papeles Tissue S.A. 1.42% e Inversiones CMPC S.A. 98.53%.
(9) On October 30, 2019, the subsidiary CMPC Melhoramentos Ltda. performed a capital increase that was fully subscribed by its shareholder CMPC Tissue S.A. As a result of this operation, the capital stock of CMPC Melhoramentos Ltda. was increased by a total of ThUS$330,121 and consequently the new shareholders are CMPC Tissue S.A. 99.97% and Inversiones Protisa SpA 0.03%.
(10) On October 31, 2019 the subsidiary CMPC Melhoramentos Ltda. materialized and formalized the acquisition of 100% of the social rights of Sepac - Serrados e Pasta e Celulose Ltda. The control was effective from November 1, 2019 and from this date the financial statements for this new subsidiary are consolidated.
11 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(11) Via public deed of March 5, 2020, issued by the public notary Mr. Roberto Antonio Cifuentes Allel, the investment company CMPC Ventures SpA was constituted. This company’s share capital amounts to ThUS$217, fully subscribed by its single shareholder, Empresas CMPC SA.
(12) In April 2020, the last resolution for the liquidation of CMPC Investments Ltd. was sent for registration with the Trade Registry in Guernsey. As of the date of the issuance of these Consolidated Financial Statements, the voluntary liquidation process has resulted in the effective dissolution of the company.
(13) At the extraordinary shareholders’ meeting of the subsidiary CMPC Tissue S.A. held on May 22, 2020, the shareholders agreed a capital increase of ThUS$99,972 through property contribution of a credit that at that date Inversiones CMPC S.A. held from the subsidiary La Papelera del Plata S.A. As a result of this transaction, the shareholder Inversiones CMPC S.A. subscribed all the shares comprising the new issuance. Accordingly, the new distribution of interest is: Empresas CMPC S.A. 0.04%, CMPC Papeles Tissue S.A. 1.22% and Inversiones CMPC S.A. 98.74%.
(14) At the extraordinary shareholders’ meeting of the subsidiary La Papelera del Plata S.A. held on May 22, 2020, the shareholders agreed a capital increase of ThUS$35,431 through the capitalization of equity reserves materialized through the issuance of shares released to all its shareholders. Additionally, the shareholders agreed to another capital increase of |ThUS$99,972 through the capitalization of the credit previously acquired by CMPC Tissue S.A. As a result of both transactions, the Group's new distribution of interest is: CMPC Tissue S.A. 18.8255%, Inversiones Protisa SpA 15.4069% and CMPC Inversiones de Argentina S.A. 65.7596%.
(15) On May 29, 2020, the subsidiary Forsac SpA issued new shares that were fully subscribed by its shareholder CMPC Papeles S.A. As a result of this transaction, the share capital of the subsidiary was increased by a total of ThUS$13,300 and, consequently, the new distribution of interest is : CMPC Papeles S.A. 81.78%, Inversiones CMPC S.A. 18.21% and Empresas CMPC S.A. 0.01%.
(16) On May 29, 2020, the subsidiary Forsac México S.A. de C.V. issued new shares that were fully subscribed by its shareholder Forsac SpA. As a result of this transaction, the share capital of the subsidiary was increased by a total of ThUS$13,300 and, consequently, the new distribution of interest is: CMPC Papeles S.A. 99.93% and Forsac SpA 0.07%.
(17) On June 2, 2020, the subsidiary Forsac México S.A. de C.V. acquired 100.00% of the shares of the share capital of Samcarsa de México S.A. de C.V. for a total of ThUS$13,000, and at the same time grants 1 of such shares to Forsac SpA. As a result of such transaction, the financial statements of the new subsidiary, whose shareholders are Forsac México S.A. de C.V. 99.9982% and Forsac SpA by 0.0018%, are consolidated.
(18) Effective on October 31, 2020 and via public deed of October 30, 2020, issued and notarized by the public notary of Mexico City, Mr. José Luis Villavicencio, the subsidiary Samcarsa de México S.A. de C.V., as the merged company, it merges and transfers all its rights and obligations to Forsac México S.A. de C.V., where the latter became the survivor company.
12 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(18) Via public deed of December 31, 2020, issued and notarized by the public notary Mr Roberto Antonio Cifuentes Allel, it was agreed to execute a capital increase of ThUS$10,000 in the subsidiary CMPC Ventures SpA, which have been fully subscribed by its sole shareholder Empresas CMPC S.A.
Considering the continued profitable operations of the Company, new investment plans locally in Chile and abroad and the access to resources in the financial market, the Management declares that the principle of the company of going concern is fully complied with.
The total workforce of the Company and its subsidiaries as of December 31, 2020 consists of 19,716 employees (18,933 as of December 31, 2019) distributed among the various operating segments detailed as follows:
Managers and key Profe ssiona ls & Segment Employees Total executives technicians Pulp 239 1,658 3,208 5,105 Biopackaging 127 986 2,535 3,648 Softys 536 2,885 7,180 10,601 Others 57 305 - 362 Total (unaudited) 959 5,834 12,923 19,716
The average number of employees of CMPC for the period ended December 31, 2020 was 19,403 (17,484 as of December 31, 2019).
These Consolidated Financial Statements include the Consolidated Statement of Financial Position, Consolidated Statement of Comprehensive Income, Consolidated Statement of Cash Flows (direct method), and Consolidated Statement of Changes in Equity and the accompanying disclosure Notes.
The Company’s functional currency and presentation currency is the United States dollar (hereinafter the "dollar"). Except for subsidiaries in the Softys operating segment, which use the local currency of each country as their functional currency, as the main revenue and expenses are generated and paid in local currencies.
Subsidiaries from Softys operating segment (with the exception of the subsidiaries La Papelera del Plata S.A. and Naschel S.A. which operate in a hyperinflationary economy, see note 2.4.d) whose functional currency is other than the dollar, have converted their financial statements from their functional currency to the Group’s presentation currency, which is the dollar. The following exchange rates have been used: the Statement of Financial Position, net at the financial statement period-end exchange rate, and the Statement of Comprehensive Income, the Statement of Changes in Equity and Statement of Cash Flows at the transaction date exchange rate or average monthly exchange rate, as appropriate.
These Consolidated Financial Statements are presented in thousands of dollars (ThUS$) and have been prepared from the accounting records of Empresas CMPC S.A. and its subsidiaries.
Assets and liabilities are classified according to their current maturities, those maturing in twelve months or less, and non-current maturities, those whose maturity is greater than twelve months in the Consolidated Statement of Financial Position. In turn, in the Consolidated Statement of Comprehensive Income, expenses classified by function are presented in Note 34 additional information on their nature. The Consolidated Statement of Cash Flows is presented by using the direct method.
13 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The Consolidated Financial Statements present fairly the equity and financial position as of December 31, 2020, as well as the results of operations, changes in equity and consolidated cash flows generated by the Subsidiaries of the CMPC Group Company for the year ended as December 31, 2020.
The figures in the Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Comprehensive Income, Consolidated Statement of Cash Flows and their respective Explanatory Notes are presented compared with the same previous periods, in accordance with the requirements of the IFRS (International Financial Reporting Standards).
The Company's Management declares that these Consolidated Financial Statements have been prepared in accordance with the IFRS as adopted by the IASB (International Accounting Standards Board).
These consolidated financial statements have been approved by the Board of Directors during the Meeting held on March 4, 2021, at which the Directors granted the Management an authorization to publish and transmit these financial statements to the regulatory and market authorities.
Capital management
Capital management refers to the management of the Company's equity capital. The objectives of the Company in relation to capital management are to safeguard the Company's capacity to continue as a going concern, as well as its capacity to generate ensuring returns for its shareholders. To meet these objectives, the Company is constantly monitoring the returns obtained by each business, maintaining its correct operation and thus maximizing financial returns for the shareholder. In addition, financial instrument investment decisions of each business (division) are in line with the Company’s conservative profile and are performed at normal market conditions. Financial instruments are constantly monitored by the Company’s Board. Among the activities relating to capital management, the Company reviews its cash balance daily to make its investment decisions.
CMPC manages its capital structure so that its indebtedness does not affect its ability to pay its obligations or obtain an adequate return for its investors. CMPC has acquired an obligation to comply with certain financial ratios from its issuance of debt instruments: it needs to maintain a ratio of financial obligations to third parties and equity (adjusted for contracts) equal to or less than 0.80. As of December 31, 2020 and December 31, 2019, this relationship is comfortably met, reaching levels of 0.53 and 0.50 in both periods (see note 22.2.e). In addition to the above, and as part of the financial covenants CMPC must comply with, at the end of each financial year the Company must maintain minimum equity of Chilean “Unidades de Fomento” (UF) 71,580,000 plus 85% of new capital issuances after March 31, 2012 (total, a sum equal to US$3,528 million as of December 31, 2020 and US$3,308 million as of December 31, 2019). Condition that is comfortably met, considering that equity (adjusted based on contracts) amounted to US$7,544 million as of December 31, 2020 and US$7,758 million as of December 31, 2019 (see Note 22.2.e). Similarly, the Company must maintain a consolidated EBITDA coverage ratio to financial expenses greater than or equal to 3.25x, a condition that was met by reaching a coverage of 4.98x as of December 31, 2020 and 6.09x as of December 31, 2019. (See Note 22.2.e).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
14 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The main accounting policies adopted in the preparation of these consolidated financial statements are described below. As required by IAS 1 “Presentation of Financial Statements”, these policies have been designed considering the IFRS accounting standards effective as of December 31, 2020, together with the policy changes, which became effective as of January 1, 2020, and have been consistently applied to the financial years presented in these Consolidated Financial Statements when applicable.
2.1. Basis of preparation
The preparation of the Consolidated Financial Statements under IFRS requires the use of certain critical accounting estimates and requires the management to exercise its judgment in the process of applying accounting policies in the Company. Note 4 discloses the areas that imply a higher degree of judgment or complexity or the areas where the hypotheses and estimates are significant for the Consolidated Financial Statements.
The Company generally uses cost accounting as its criteria to value assets and liabilities, except for hedging financial instruments, certain financial assets and liabilities, and biological assets, which are recorded at fair value, thus, this manner of periodic measurement eliminates or reduces inconsistencies in their valuations and/or yields.
Some balances of the comparative financial statements as of December 31, 2019, were reclassified for a consistent presentation with the financial statements as of December 31, 2020.
2.2. Basis of presentation a) Subsidiaries
Subsidiaries are those companies in which Empresas CMPC S.A. controls, directly or indirectly, most substantive voting rights or else has rights that grant them the present capacity to direct their relevant activities, and included for this purpose are any potential voting rights in CMPC´s possession, or those belonging to third parties, exercisable or convertible as of each year-end. In addition, CMPC is exposed or entitled to the variable returns of these companies and has the capacity to influence these amounts.
Subsidiaries are consolidated from the date on which control is transferred to Empresas CMPC S.A. and are excluded from consolidation on the date on which such control ceases. b) Non-controlling interests and transactions
As part of the consolidation process, transactions, receivable and/or payable balances and unrealized income from transactions between related CMPC companies are eliminated. The accounting policies of subsidiaries are consistent with those of the parent company.
Non-controlling interests are presented under Shareholders’ Equity in the Consolidated Statements of Financial Position. The profit or loss attributable to non-controlling interests is presented in the Statement of Comprehensive Income as profit (loss) for the year. Results of transactions between non-controlling shareholders and the shareholders of the subsidiaries where ownership is shared are accounted for in equity and are therefore shown in the Statements of Changes in Equity.
15 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
c) Associates
Associates are all entities over which Empresas CMPC S.A. has significant influence but not control over the financial and operating policies. Investments in associates are accounted for using the equity method.
In accordance with the equity method, the investment in an associate or joint venture is initially recorded at cost, and the carrying amount is increased or decreased to recognize the share of CMPC in the income of the investee for the period, after the date of acquisition. Distributions received from the investee reduce the carrying amount of the investment. Changes in Other comprehensive income of the investee that arise from foreign currency translation differences are recognized in the Company's Consolidated Statement of Comprehensive Income.
When the Company´s share in the losses of an associate is equal to or exceeds its investment in the associate, including any other unsecured accounts receivable, the Company´s does not recognize additional losses unless it has incurred obligations or made payments on behalf of the associate.
At the time of the acquisition of the investment, any difference between the cost of the investment and CMPC’s share in the net fair value of the identifiable assets and liabilities of the investee are accounted for in the following manner: i) goodwill related to an associate or a joint venture is included in the carrying amount of the investment (amortization of this goodwill is not permitted) and ii) any excess of the fair value of the net identifiable assets and liabilities of the investee over purchase Price of the investment in a bargain purchase is recorded as income in the statement of comprehensive income at the date of acquisition. (See Note 2.9.).
2.3. Financial information by segment reporting
IFRS 8 “Operating Segments” requires that entities disclose the information on operating segments in the same manner the key executives monitor the operations of the Company. In general, this is the information that management uses internally to assess the performance of the segments and decide how to allocate resources to them.
The Company presents information by segment (which corresponds to business areas) based on the financial information made available for decision makers, regarding matters such as measuring profitability and allocation of investments, and based on differentiation of products, as indicated in IFRS 8.
Segments, thus determined, which reflect the current business management structure, are detailed as follows:
Pulp Biopackaging Softys
Income from areas other than the mentioned segments, related to the parent Company (CMPC) and others not transferred to operating segments, is presented under “Other”. Additionally these operating segments do not individually represent amounts that are significant enough for their designation as an operating segment.
16 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
2.4. Foreign currency transactions a) Presentation and functional currency
Items included in the financial statements of each of the entities of the Company are measured using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in dollars, which is the functional currency of the Company. b) Transactions and balances
All operations performed by Empresas CMPC S.A. or its subsidiaries in a currency other than the functional currency of each company are treated as foreign currency transactions and are recorded at the exchange rate prevailing on the transaction date.
Balances of monetary assets and liabilities denominated in foreign currencies are valued at the exchange rate at each period. The variation between the original and closing value is recorded in foreign currency translation differences in the Statement of Comprehensive Income (loss), except when these changes are deferred in the Statement of Changes in Equity, such as cash flow hedges.
Changes in the fair value of investments in debt instruments denominated in foreign currency classified as Fair Value Through Other Comprehensive Income (FVOCI), if any, are separated between exchange differences and the increase corresponding to the gain of the instrument measured in the functional currency. Exchange differences are recognized in the comprehensive income statement of the year and the profit of the financial instrument is recognized in equity. c) Subsidiaries of Empresas CMPC S.A.
The profit and financial position of all CMPC entities (which do not operate with the currency of a hyperinflationary economy) with a functional currency other than the presentation currency are converted to the presentation currency as follows: i) The assets and liabilities of each statement of financial position are converted at the financial statements period-end exchange rate; ii) The income and expenses of each income statement account are converted at the daily exchange rate or when this is not possible, the average monthly exchange rate is used as a reasonable approximation; and iii) The variations determined by exchange differences between the investment accounted for in a company whose functional currency is different to the functional currency of the subsidiary in which it has been invested is recorded in the Consolidated Statement of Comprehensive Income, forming part of the Equity as currency translation differences reserve.
Foreign currency translation differences by balances maintained in long-term current accounts between subsidiaries with different functional currencies are eliminated from income and recorded in the foreign
17 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement currency translation differences reserves account under net equity, since they are treated as net investments in those subsidiaries.
d) Hyperinflation in Argentina
In accordance with IAS 29 "Financial information in hyperinflationary economies", an economy is considered to be hyperinflationary if it presents a series of characteristics, such as an accumulated inflation rate above 100% over the past three years. For purposes of IAS 29, as of July 1, 2018, the economy of Argentina is considered hyperinflationary and, therefore, the financial statements presented by the subsidiaries whose functional currency is the Argentine peso, were prepared by applying the requirements of IAS 29 as if the economy had always been hyperinflationary, in accordance with the interpretation of IFRIC 7 "Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies”.
The financial statements of the subsidiary La Papelera del Plata S.A. and Naschel S.A., whose functional currency is the Argentine peso, were adjusted retrospectively at the date the Group applied IAS 29, by applying a general price index to historical cost, in order to measure changes in the purchasing power of the Argentine peso at the closing date of these financial statements, prepared in accordance with IAS 29, and subsequently converted to the dollar in accordance with IAS 21 "Effects of changes in the exchange rates of the foreign currency ", using the closing exchange rate as of December 31, 2020 and December 31, 2019 for all the figures in the consolidated statements of financial position and the consolidated statements of comprehensive income; considering that the functional and presentation currency of Empresas CMPC S.A does not correspond to that of a hyperinflationary economy according to IAS 29.
18 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The rates and coefficients used for the re-expression were the following:
Rates: Domestic wholesale price indexes (IPIM) as of December 31, 2016 - consumer price index of the CABA (IPCBA) for the months of November and December 2015 in which the National Institute of Statistics and Cencos (INDEC) did not publish the IPIM - and national consumer price indexes (CPI) as of January 1, 2017.
Coefficients: Coefficients were determined based on the aforementioned indices, considering as base 100 the index of December 31, 2016.
It should be noted that the Consumer Price Index for the period ended December 31, 2020 it was 36.1% (53.8% for period ended December 31, 2019) according to figures provided by INDEC. e) Foreign currency exchange rate
The exchange rates (represented as units of each currency per dollar) of the primary currencies used in the accounting processes of the CMPC companies as of December 31, 2020, and December 31, 2019, are as follows:
12/31/2020 12/31/2019 Cumulative Cumulative Currency Closing monthly Closing monthly average average Chilean peso CLP 710.95 792.22 748.74 702.63 Unidad de fomento * UF 0.024 0.028 0.026 0.025 Argentinean peso ARS 84.15 70.64 59.89 48.24 Peruvian new sol PEN 3.62 3.49 3.32 3.34 Mexican peso M XN 19.95 21.49 18.85 19.26 Uruguayan peso UYU 42.34 42.00 37.31 35.24 Colombian peso COP 3,432.50 3,693.74 3,277.14 3,279.61 Euro EUR 0.81 0.88 0.89 0.89 Brazilian real BRL 5.20 5.16 4.03 3.95 Pound Sterling GBP 0.74 0.78 0.76 0.78
* The “Unidad de Fomento” (UF) is a monetary unit denominated in Chilean pesos indexed to Chile's inflation rate. Its value is established daily and in advance, based on the variation of the Consumer Price Index (IPC) of the previous month. The effects generated by updating assets and liabilities in UF are recorded in the caption Result for adjustment units in the Consolidated Statement of Comprehensive Income.
2.5. Business combinations
The business combination is recognized using the acquisition method, except some assets and liabilities that are recognized according to other methods established in other standards, as required by IFRS 3 "Business Combinations". Applying the acquisition method requires: i) identifying the acquirer, ii) determining the acquisition date, iii) recognizing and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, and iv) recognizing and measuring goodwill or a gain from a bargain purchase.
19 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The application of the principle and the conditions of recognition may result in the accounting of some assets and liabilities that the acquiree has not previously recognized as such in its financial statements, for example the identifiable intangible assets acquired that were generated internally and affected results in the period that the expense was incurred.
For each business combination, CMPC will measure the net identifiable assets acquired and the liabilities assumed at their fair values on the acquisition date. Meanwhile, the components of the non-controlling interests will be measured at fair value or proportional share of the identifiable net assets of the acquiree.
If the acquisition cost exceeds the fair value of the net identifiable assets of the acquiree, the Company shall recognize a goodwill according to the description on note 2.9. Otherwise, if the acquisition cost is lower than the fair value of the net identifiable assets of the acquiree, the gain should be included in the Consolidated Financial Statement of Comprehensive Income in Other gains (losses).
In a business combination achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss.
When the company carries out an inverse acquisition (the subsidiary absorbs its parent company), the goodwill is recorded in the statement of financial position of the continuing entity. In this merger the parent company is dissolved, transmitting all of its assets and liabilities to the subsidiary, which is the legal continuing entity and receives all the legal rights over the parent that was absorbed.
A business combination under common control is recorded using the pooling of interest method as a reference. Under this method the assets and liabilities involved in the transaction are kept reflected at the same value books in which they were originally registered. Any difference between the assets and liabilities contributed to the consolidation and the consideration given is recorded in the line of Other Reserves within Equity.
2.6. Property, plant and equipment
Additions to property, plant and equipment are accounted for at acquisition cost. Additions purchased in a currency other than the functional currency are converted to that currency at the exchange rate on the date of acquisition. Acquisitions made by subsidiaries whose functional currency is different from the dollar are accounted for at their functional currency, restated in dollars at the year-end exchange rate.
For the measurement of the main properties, plants and relevant equipment acquired before the date of transition to IFRS, their fair value was determined based on appraisals made by the expert staff. For the rest of the properties, plants and equipment, the historical cost model was used.
In an eventual financing of an asset through direct and indirect loans, interest is capitalized during the construction or acquisition period, to the extent that said assets can be identified.
The cost may also include gains or losses on qualifying hedges of cash flows from acquisitions in foreign currency of property, plant and equipment if the hedge is taken exclusively for the acquisition of the property, plant and equipment.
20 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Depreciation of property, plant and equipment is calculated using the straight-line method. The useful life of property, plant and equipment is determined based on expected natural wear, technical or commercial obsolescence derived from changes and / or improvements in production and changes in market demand for the products whose production is supported by such assets. Land included in this account, whether forestry or industrial, is not depreciated.
Subsequent to its recognition as an asset, an item of property, plant and equipment shall be recorded at cost less accumulated depreciation and the accumulated amount of impairment losses if they exist.
The useful lives of assets are reviewed and adjusted, if necessary, at the end of each reporting period. The Company has determined that the residual value assigned to the property, plant and equipment is zero, given that said assets are productive plants and the company has no plans to sell such assets.
The estimated useful lives (in years) for the main type of assets are the following:
Minimun Maximun Type of assets useful life useful life Buildings 5 82 Plant and equipment 3 45 Office equipments 3 15 Fixture and accessories 3 10 Transportation equipment 5 20 Other property, plant and equipment 3 10
Expenses associated with daily maintenance and common repairs are recorded as expenses in the statement of comprehensive income for the year, in which they are incurred. In contrast, replacement of parts or pieces and spare parts with significant useful lives are capitalized and depreciated over the useful lives of the underlying primary assets, based on the component approach.
Profits and losses on disposal of property, plant and equipment are calculated comparing the proce eds to the carrying amount (net of depreciation) and are included in the statement of comprehensive income at line item “Other profits (losses)”.
2.7. Biological assets (forest plantations)
Forest plantations are presented in the statement of financial position at fair value according to IAS 41 “Agriculture” and IFRS 13 “Fair value”. Groups of forests are accounted for at fair value at a "standing timber" level, i.e. discounting harvesting costs and transportation expenses to the point of sale, there is a presumption that the measurement can be identified reliably.
At the end of the period, the effect of the growth of forest plantations, expressed in their fair value (sale price less estimated costs at the point of sale), is presented as "Other income, by function" in the consolidated statement of comprehensive income
21 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The forest plantations that will be harvested in the 12 months following the date of presentation of the consolidated financial statements are classified as current biological assets.
Plantations in their first year are valued at their cost of establishment, equivalent to the fair value at that date.
The costs of setting up forest plantations are classified as biological assets and the maintenance expenses of these assets are recorded as expenses in the year in which they are incurred and are presented as cost of sales.
Biological assets are recognized and measured at fair value separately from the land. However, a forest plantation has economically associated the growth and soil while it is in development.
2.8. Intangible assets
Intangible assets refer mainly to software, power line easements, water rights, emission rights, trademarks and other intangibles. a) Software
Costs for the acquisition and development of relevant and specific computer software for the Company are activated and amortized during the period once the period in which it is expected to generate future cash flows from its use (average useful life of three years), charged to the depreciation and amortization expense account in the item Cost of sales of the Consolidated Statement of Comprehensive Income. b) Power line easements
The Company has paid for easements for the construction and operation of power lines on third-party land which are necessary for the operation of its industrial plants. Since these rights are perpetual, they are not amortized; however, they are tested for impairment on an annual basis. c) Water rights
The water rights acquired by the Company correspond to the right to use existing water in natural sources and are recorded at their acquisition cost. Since these rights have indefinite useful lives, they are not amortized; however, they are tested for impairment on an annual basis.
d) Emission rights
In Chile, the Company has emission rights for particulate material and NOx (nitrogen oxides), both those allocated directly to the Company by the National Environmental Commission (CONAMA) and those purchased from third parties. These emission rights are necessary for the normal operation of the Company´s factories. These rights are recorded at acquisition cost, to the extent that there are payments, since the Company obtains control and measurement of them. These rights have an indefinite useful life and are subject to deterioration evaluation annually.
22 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
e) Trademarks
CMPC has a portfolio of trademarks, which were mainly developed internally, whose Disbursements incurred in trademark development are recorded as operating expenses in the period in which they are incurred. In addition, brands that have been recognized as intangible assets other than goodwill have been acquired mainly through business combinations, and in certain cases acquired from third parties. For those in the former case, they have been measured at Fair Value through Purchase Price Allocation carried out by professionals who are independent from the Company, while the latter cases are measured at the cost of registration with the Public Registry of Trademarks or purchase value, respectively. These rights have an indefinite useful life and are subject to deterioration evaluation annually. f) Relationship with clients
CMPC has an active portfolio of customers in Brazil and Mexico, both acquired by the Company through a business combination. These assets come from the purchase of Sepac - Serrados e Pasta e Celulose L tda. and Samcarsa de México S.A. de C.V., and have been identified by professionals who are independent from the Company during the performance of Purchase price allocation. Such relationships with customers are amortized in the period in which they are expected to generate revenue from their use, charged to the amortization expense account in the line item Cost of sales in the Consolidated Statement of Comprehensive Income.
2.9. Goodwill
Goodwill is determined on the date of acquisition of a subsidiary and is measured as the excess of: i) the sum of the consideration transferred plus the amount of any non-controlling interest in the acquired company over and ii) the sum of the fair value of the net identifiable assets acquired and liabilities assumed on the acquisition date. Goodwill related to the acquisition of subsidiaries is annually tested for impairment, recognizing corresponding cumulative impairment losses that correspond in the result of the period. Profits and losses from the sale of an entity include the carrying amount of the goodwill related to the entity sold.
Goodwill originated from the acquisition of companies which functional currency is other than the dollar is booked in the same way as if they were foreign currency assets, i.e. are adjusted by the variation in the foreign exchange rate of the respective currency.
Goodwill is allocated to Cash Generating Units (CGUs) for the assessment of impairment losses (see note 2.10). The allocation is made in those CGUs that benefit from the business combination in which the acquired Goodwill arose. Each of these CGUs represent the investment in a subsidiary for each segment of CMPC.
In a business combination with more advantageous terms than the market, the difference between the purchase price and the fair value of the net assets identified is recorded as a gain of the period in the Consolidated Statement of Comprehensive Income.
23 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
2.10. Impairment losses on non-financial assets
Intangible assets with an indefinite useful life and acquired goodwill are not amortized and are tested annually (or sooner if there is evidence of impairment) to ensure that the carrying amount does not exceed the recoverable value.
Assets subject to depreciation (property, plant and equipment) are tested for impairment if some event or change in business circumstances indicates that the carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount is greater than the recoverable amount. The recoverable amount of an asset is either its fair value minus the cost of sale or its value in use, whichever is higher. In order to assess impairment, individual assets are grouped with other assets of the cash-generating unit of which they are part and that generate individual cash flows at the CGU level. The company has determined as UGE the investment in a subsidiary for each of the CMPC segments.
Non-financial assets other than goodwill that have been subject to impairment are tested on each accounting closing date to check for possible reversal of losses if there is evidence that the current market situation or other conditions that triggered impairment have changed. Impairment losses can be reversed only up to the amount of the losses recognized in previous years, in order for the carrying amount of these assets not to exceed the value they would have had if such adjustments had not been recorded. This reversal is recorded in other profits (losses) in the Consolidated Statement of Comprehensive Income.
2.11. Financial instruments a) Classification and measurement
The Company classifies financial instruments based on the business model in which they are managed and their contractual cash flows characteristics.
The classification and measurement of CMPC's financial instruments is as follows: i) Financial instruments at Fair Value Through Profit and Loss "FVTPL". These instruments are measured at fair value. Net earnings and losses, including any interest or dividend income, are recognized in profit or loss for the period. ii) Financial instruments measured at amortized cost that are maintained with the objective of collecting contractual cash flows that meet the criteria "solely payments of principal and interest on the principal amount" “SPPI”. This category includes trade and other accounts receivable, trade and other accounts payable, and loans included in other current and non-current financial liabilities. iii) Financial instruments measured at Fair Value Through Other Comprehensive Income "FVOCI", with gains or losses reclassified to results of the period at the time of recognition. The financial instruments in this category meet the SPPI criteria and are kept within of the Company business model both to collect cash flows and to sell.
24 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
b) Subsequent measurement
Financial instruments are subsequently measured at "FVTPL", Amortized cost or "FVOCI". The classification is based on two criteria: i) the Company's business model for managing financial instruments, and ii) whether the contractual cash flows of the financial instruments represent “SPPI” (Solely Payments of Principal and Interest test). i) Financial instruments at "FVTPL": These instruments are subsequently measured at fair value. Net gains or losses, including any interest or dividend income, are recognized in the Consolidated Statement of Comprehensive Income.
Financial instruments measured at "FVTPL" are held for trading and are acquired mainly for the purpose of selling in the short term. Derivative instruments are also classified as held for trading unless they are designated with hedge accounting treatment. Financial instruments in this category are classified as other current assets or liabilities. Its subsequent valuation is made by determining its fair value, recording the changes in value in the Consolidated Statement of Comprehensive Income, in the line "Other gains (losses)". ii) Financial instruments at amortized cost: These instruments are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Financial income and expenses, foreign exchange earnings and losses, and impairment are recognized in results. Any earning or loss is recognized in profit or loss of the period.
Loans and trades are non-derivative financial instruments with fixed or determinable payments that are not quoted in an active market. This category includes "Trade and other accounts receivable", “Trade and other accounts payable” and loans included in “Other current and non-current financial liabilities”. Its recognition is made through the amortized cost, recording the accrual of the agreed conditions directly in results. iii) Financial instruments at "FVOCI": These instruments are subsequently measured at fair value. Interest income calculated using the effective interest method, exchange gains and losses and impairment are recognized in income. Other net gains and losses are recognized in other comprehensive income "OCI". On de-recognition, earnings and losses accumulated in "OCI" are reclassified to results.
As of the date of each Consolidated Statement of Financial Position, CMPC evaluates if there is objective evidence that a financial instrument or group of financial instruments may have suffered impairment losses.
2.12. Hedging Instruments
Derivatives are initially recognized at fair value on the date a derivative contract is executed and are subsequently re-measured at their fair value on each accounting closing date. The method for recognizing the resulting profit or loss depends on whether the derivative has been designated as a hedge instrument or not, and if it has been designated as such, it shall depend on the nature of the item that is being hedged.
25 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
CMPC designates certain derivatives as:
- Fair value hedges on recognized assets and liabilities (fair value hedge). - Hedges on a specific risk associated with a recognized liability or a highly probable foreseen transaction (cash flow hedge).
At inception of the transaction, the Company documents the transaction relationship between the hedging instrument and the hedged item, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Company also documents its assessment, both at the beginning and end of each period, as to whether the derivatives used in hedging transactions are highly effective in offsetting changes in the fair value or cash flows of the hedged items.
The fair value of derivative instruments used for hedging purposes is disclosed in Notes 8 and 22 (hedging assets and liabilities, respectively). Movements in the Cash Flow Hedge Reserve in equity are disclosed in Note 28. The total fair value of hedging derivatives is classified as a non-current asset or liability when the hedged item matures in more than 12 months or as a current asset or liability if the hedged item matures in less than 12 months. a) Fair value hedge
Changes in the fair value of derivative instruments that are designated, and qualify as hedges of the fair value of existing assets and liabilities, are recorded in the same accounts in the Consolidated Statement of Comprehensive Income where changes in the fair value of these assets or underlying liabilities are recorded. b) Cash flow hedges
The objective of currency forwards and cross-currency swaps is to reduce the financial risk of income and expense flows committed in currencies other than the dollar. The objective of oil price swaps is to hedge the risk of potential changes in the oil costs, which affect the rates of marine and land freight transportation of pulp and cardboard, and the consumption of natural gas, indexed to oil, at CMPC’s plants. In particular, currency forwards are used to hedge financial risks associated with the volatility of sales in euros and sterling pounds of the lumber and cardboard unit business, and the cross-currency swaps are used mainly to cover the price variations of the different currencies and interest rates.
Hedges are documented and tested to measure their effectiveness.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in equity in the statement of comprehensive income within equity under cash flow hedge reserves. The profit or loss related to the non-effective portion is recognized immediately in the statement of comprehensive income under other profits (losses).
In the case of currency forwards, at the time of accrual of underlying income or at the time of payment of obligations on investments in property, plant and equipment, the amount accumulated in equity (up to that date is transferred to income for the period (revenue from operating activities or costs of sales) or to property,
26 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement plant and equipment, respectively, the accrued amount in the Consolidated Statement of Changes in Equity (Cash flow hedge reserve) until that date.
Regarding the cross-currency swaps each time the hedged obligation in a cross-currency swap affects income for the year, the respective amount is reclassified from the Consolidated Statement of Changes in Equity (Cash Flow Coverage Reserve) to adequately reflect the effects of the hedge.
Valuation methodologies:
CMPC values its derivative contracts by in-house computer-used models, which are mainly based on discounting future cash flows at relevant market rates.
This system incorporates all the relevant market information ("data") at the time of the valuation and uses the Bloomberg as a source.
Main data: i) Closing exchange rates for each currency obtained from Bloomberg. ii) Future exchange rates constructed from closing exchange rates plus “forward” points obtained directly from Bloomberg (calculated with the rate differential). iii) Respective interest rates obtained from Bloomberg to discount cash flows to present value. Management uses swap rates to discount cash flows for more than 12 months as an approximation to the zero coupon rate.
For oil derivatives, valuation is obtained from information provided by third parties (at least two banks).
These measurements are classified in Level II according to IFRS 13, considering that the main input data are observable in the market.
2.13. Inventory
Finished products are measured at production cost, and their net realizable value, considering production cost to be the value determined using the weighted average cost method.
The net realizable value is the estimated selling price in the ordinary course of business, less distribution and sale expenses. In the event that the market conditions generate that the cost exceeds its net realization value, an adjustment for the value differential is recorded, and the value of the inventories is reduced.
Such allowance also takes into account amounts related to obsolescence due to slow turnover, technical obsolescence and products withdrawn from the market.
Finished and in-process products costs include raw materials, personnel compensation, depreciation of properties, industrial plant and equipment, other costs and direct expenses related to production and transfers to the point of sale.
The allocation of indirect or fixed expenses to production considers the normal production capacity of the factory or plant that generates such expenses, excluding inefficiencies and plant shutdowns.
27 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Supplies and raw materials acquired from others are valued initially at acquisition cost and when consumed are included in the cost of finished products using the weighted average cost method.
Raw materials derived from the harvest of biological assets are transferred to inventories and are initially valued based on their fair value less costs to sell at the harvest point.
2.14. Trade and other accounts receivable
Trade debtors and other accounts receivable are presented initially at their fair value and subsequently at their amortized cost.
The Company measures the accumulated losses in an amount equal to the Expected Credit Loss "ECL" for life.
The Company uses the simplified approach with the practical expedient included in IFRS 9 in the stratification of the maturity of the portfolio.
To determine whether there is impairment on the portfolio, the Company performs risk analysis according to historical experience (three years) over the default of the receivables, which is adjusted according to macroeconomic variables, with the objective of obtaining forward-looking information for the estimate.
CMPC considers that the financial assets are in default when: i) It is unlikely that the debtor will pay its credit obligations in full, without the Company taking actions such as the insurance claim, or ii) Financial asset has exceeded the expiration date contractually agreed. a) Measurement of the expected loss
The "ECL" is a weighted estimate of the probability of credit losses. Credit losses are measured considering the recoverability of the last three years. These historical ratios are adjusted with the statistical calculation of "Forward Looking" which converts the historical loss into an estimated projected loss according to a correlation of macroeconomic variables. b) Credit impairment
On each accounting closing date, the Company evaluates if the financial assets accounted for at amortized cost have credit impairment. A financial asset has "credit impairment" when one or more events that have a detrimental impact on the estimation of future cash flows occur. c) Presentation of Impairment
Impairment losses on the financial assets measured at amortized cost are deducted from their gross amount.
2.15. Cash and cash equivalents
Cash and cash equivalents are the balances of money held in the Company and current bank accounts, time deposits and other financial investments (negotiable securities that are easy to liquidate, subject to an
28 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement insignificant risk of changes in value) that are due less than 90 days from the date of investment. Also included within this item are those investments inherent to the administration of cash, such as repurchase agreements whose maturity is in accordance with the previously defined.
Bank over facilities used are included in interest bearing loans as “other current financial liabilities.”
2.16. Issued capital
Ordinary shares are classified as shareholder’s equity.
2.17. Trade and other accounts payable
Accounts payable to suppliers are initially recognized at fair value and are subsequently valued at amortized cost.
2.18. Interest-bearing loans
Interests bearing loans, classified as other financial liabilities, are initially recognized at fair value, which corresponds to the value of the net debt of directly associated transaction expenses, and are then measured at amortized cost using the effective interest rate.
2.19. Current and deferred Income taxes
The income tax expense includes the taxes of Empresas CMPC S.A. and its subsidiaries, based on their taxable income for the year, together with tax adjustments for previous years and changes in deferred taxes.
Deferred income tax is calculated using the liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts. However, deferred tax is not recorded if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction does not affect accounting income or taxable income or loss. Deferred tax is determined using income tax rates under current laws or laws that are on the verge of being enacted, in each country of operation, on the date of the financial statement and which are expected to apply when the related deferred tax asset is realized, or the deferred tax liability is settled.
Deferred tax assets are recorded when it is considered likely that the group entities will generate sufficient future taxable income against which temporary differences can be used.
In accordance with IAS 12 “Income Taxes”, no deferred taxes have been recognized on temporary differences arising between the taxable and accounting value generated by investments in related companies, since the Company maintains control of the moment of reversal of the temporary difference with the exception of CMPC Tissue S.A. on its investment in Brazil. Therefore, deferred tax arising from foreign currency translation or shares in other comprehensive income of associates recorded directly in net equity in the other comprehensive income statement has not been recorded.
In accordance with IFRIC 23, uncertainty regarding income tax treatments, current and deferred current taxes reflect uncertainty related to income taxes, when applicable.
29 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
2.20. Employee benefits
Many of CMPC’s subsidiaries located in Chile have collective bargaining agreements with their employees that grant termination benefits in the event of voluntary retirement or termination. A liability is therefore recognized and is presented at present value using the projected unit credit method.
Brazilian subsidiary Melhoramentos CMPC Ltda. signed a commitment in 1997 with the employee labor union to provide medical assistance for life to its retired employees as of that date. The amount recorded in the current financial statements refers to the actuarial calculation of the obligation generated by this commitment.
These obligations are considered as “Defined Benefit Plans” according to IAS 19 "Employee Benefits", and are recorded in Provisions for employee benefits, current and non-current liabilities, based on the probability of payment before or after 12 months from the date of presentation of the consolidated statement of financial position of the company. The expenses related to these commitments are recorded according to accrual criteria during the employees' working life.
Profits or losses due to changes in actuarial assumptions, if any, are recognized in equity in other comprehensive income within “Actuarial profits or (losses) on defined benefit plans reserves”.
For employees of foreign subsidiaries whose country legislation establishes the providing of seniority benefits to employees, an obligation is recorded on the basis of actuarial studies carried out using the projected unit credit method. Distinguishing between those that are expected to be settled in the short and long term.
Brazilian subsidiary CMPC Celulose Riograndense Ltda. has a collective bargain agreement with its employees that establishes annual accrual of profit sharing according to established goals, payable every three years.
Additionally, the Company maintains obligations associated with Seniority Awards.
These obligations are according with the characteristics of short-term and other long-term employee benefits, depending if they are expected to be settled before or after the 12 months from the date of presentation of the Consolidated Financial Statements; which "Current and non-current provisions for employee benefits" will be classified as liabilities. For both cases, the provision is recorded as an expense in the accrued period.
2.21. Provisions
Provisions are recognized when CMPC has a present legal or constructive obligation as a result of past events, when it is estimated that it is probable that an outflow of funds will be required to settle the obligation and when the amount of this obligation can be reliably estimated.
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The amount recognized as a provision reflects the best estimate of the disbursements that are expected to be necessary to cancel the obligation at the end of the period, and is discounted to the present value when the financial effect produced by the discount is considered material.
Restructuring provisions are recognized in the year in which CMPC is legally or constructively committed to the plan. Relevant costs are only those which are incremental or incurred as a result of the restructuring.
Restructuring provision is recognized with the estimated cost according with the formal plan of closing, and is revaluated annually, or as of the date on which such obligations are known. The Company recognizes restructuring provision at net present value discounting the provision using the free-risk discount rate depending on the underlying currency and depending on the duration of the obligation. Variables related to discount rates used and of the costs of incurring are reviewed annually.
Additionally, they are considered provisions to be charged to income as a result of civil, labor and tax lawsuits. These provisions correspond to estimates made in accordance with the accounting policy of CMPC and are intended to cover eventual effects that may arise from the resolution of lawsuits in which the company and its subsidiaries are involved. These lawsuits are derived from transactions that form part of the normal course of CMPC's business and their details and scope are not publicly known and their detailed exposure could affect the company’s interests, progress and resolution, according to legal reserves of each administrative and judicial procedure. Therefore, based on IAS 37 "provisions, contingent liabilities and contingent assets", paragraph 92, although the amounts provisioned in relation to these lawsuits are indicated, no further detail of them is disclosed at the close of these Consolidated Financial Statements.
2.22. Revenue recognition
Revenue from contracts with customers is composed of sales of products, raw materials and services, at the exchange rate on the day of the transaction in consideration of the functional currency of each subsidiary.
Sales associated with discounts by volume subject to compliance with certain objectives are recognized at net value, estimating the probability that those discounts will either be met or not.
Sales subject to return and their associated costs are recognized at net value considering the provision estimated for future returns.
Revenue from the sale of goods is recognized once the Company has transferred control of those goods to the customer and does not maintain the right to dispose of them.
The acceptance of the goods and services by the customers indicates that they have obtained control. CMPC has defined as an indicator of transfer of control for exports, the international rules and terms for trade contracts (Incoterms 2010) agreed with the customer, being the official rules as issued by the International Chamber of Commerce.
- DAT (Delivered at Terminal), DAP (Delivered at Place), DDP (Delivered Duty Paid) and similar, by virtue of which the Company has to deliver the goods to the customer at the port of destination or on the last means of delivery transport used, or at the place of destination agreed, in which case the sale is made at the time of delivery to the customer, recognizing the revenue at the time of delivery of the product.
31 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
- CIF (Cost, Insurance & Freight) and similar, by means of which the Company organizes and pays the cost of external transport and some other expenses, although CMPC ceases to be responsible for the goods once they have been delivered to the ocean or air shipping company according to the relevant deadline. The point of sale is, consequently, the delivery of the goods to the carrier hired by the seller for transport to the destination.
- FOB (Free on Board) and similar, where the customer organizes and pays for the transport, therefore, the point of sale is the delivery of the goods to the carrier hired by the buyer.
When sales do not comply with the conditions described above, it will be recognized as deferred income in current liabilities, subsequently recognized as Revenue from ordinary activities to the extent that the conditions of transfer of control of the goods are met.
CMPC acts as principal against the performance obligation associated with the transport of the goods to customer' facilities, these costs are not invoiced separately but are included in the sale price of the invoiced goods, therefore an additional performance obligation is generated which is satisfied at the time of the transfer of control of the goods to the customer and is recognized as part of the cost of sales.
Revenue from sales of products, raw material and services are recognized once the performance obligation is satisfied, i.e., once the product is received and the customer has accepted the service.
2.23. Leases
CMPC has adopted IFRS 16 "Leases" using the modified retrospective approach since January 1, 2019 and, therefore, previous information has not been restated and continues to be reported according to IAS 17 "Leases" and IFRIC 4 "Determination of whether an agreement contains a lease.” a) Accounting policy from January 1, 2019
At the start of a contract, the Company evaluates whether this is, or contains, a lease, that is, if the contract gives the right to control the use of an identified asset for a period in exchange for a consideration. To assess if a contract conveys the right to control the use of an identified asset, Empresas CMPC evaluates if: i) The contract implies the use of an identified asset; this can be specified explicitly or implicitly. If the supplier has a substantial replacement right, then the asset is not identified; ii) The Company has the right to obtain substantially all the economic benefits of the use of the asset during the period; and, iii) The Company has the right to direct the use of the asset, this right is considered when the decision making is relevant, for example how and for what purpose the asset is used. In exceptional cases where the decision on how and for what purpose the asset is used is predetermined. Empresas CMPC has the right to direct the use of the asset if it has the right to operate the asset, or designed the asset in a way that predetermines how and for what purpose it will be used.
32 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
At the beginning or in the re-evaluation of a contract that contains a lease component, Empresas CMPC allocates the compensation in the contract to each lease component based on their independent relative prices, which is, allocating the associated capital cost separately. Lessee
CMPC recognizes a right of use the asset and a lease liability at the date the lease contract is initiated.
The right of use of the asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payment made on or before the start date, plus the initial direct costs incurred and an estimate of the costs to dismantle the underlying asset or to restore the underlying asset or the site in which it is located, less the lease incentives received.
The right of use the asset is subsequently depreciated using the straight-line method from the start date to the end of the estimated useful life according to the term of the contract. The estimated useful lives of the right of use the assets are determined according to the term of the contract considering any probabilities of future renewals. In addition, the right of use of the asset is periodically reduced by impairment losses (note 2.10), if applicable, and adjusted for certain new measurements of the lease liability.
The lease liability is initially measured at the net present value of future minimum lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be easily determined, the Company's average independent borrowing rate, incorporating additional adjustments considering the risk of the country and each of the subsidiaries.
The lease payments included in the measurement of the lease liability include the following:
- Fixed payments, included in the contract, less any lease incentive receivable; - Variable lease payments, which depend on an index or a rate; - Amounts that the lessee expects to pay as residual value guarantees; - The exercise price under a purchase option that the Company can reasonably exercise; - Penalties for early termination of a lease unless the Company is reasonably certain that the contract will not be terminated in advance.
The lease liability is measured at amortized cost using the effective interest rate method. It is re-measured when there is a change in minimum future lease payments that arise from a change in an index or rate: i) The term of the lease, ii) The evaluation of an option to purchase the underlying asset, iii) The amounts payable expected in a residual value guarantee, or iv) The indices or rates used to determine future lease payments. When the lease liability is modified, an adjustment is made to the corresponding book value of the right of use of an asset, or it is recorded in profit (loss) if the book value of right of use of asset has been reduced to zero.
CMPC presents right of use of assets in property, plant and equipment category and the associated obligations in Liabilities for operating leases, current and non-current, within the Consolidated Statement of Financial Position.
33 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
In the Consolidated Statement of Comprehensive Income, interest expense and asset depreciation charge are presented separately, so that interest is recorded in the Financial Costs item in the period incurred.
CMPC has chosen not to recognize right of use if assets and lease liabilities for those contracts which term is 12 months or less, and for those contracts, which assets are less than US$20,000. The Company recognizes the lease payments associated with these operations as a linear expense during the term of the contract.
Lessor
When CMPC acted as a lessor, it determined at the beginning of the lease whether each contract corresponds to a financial or operating lease.
The Company recognizes lease payments from operating leases as income in a linear manner during the term of the contract. b) Treatment under IAS 17 (Applicable before January 1, 2019)
As lessee, CMPC classified the leases that transfer substantially all the risks and benefits of the property as financial leases.
Assets held under other leases were classified as operating leases and were not recognized in the Consolidated Statement of Financial Position. Payments made under operating leases were recognized in income on a straight-line basis over the term of the contract.
The lease incentives received were recognized as an integral part of the total lease expense during the term of the contract.
The accounting policies applicable to the Company as lessor in the comparative period are not different from those stipulated by IFRS 16.
2.24. Dividends distributed
The distribution of dividends to shareholders is recognized as a liability at the close of each fiscal year in the Consolidated Financial Statements, based on the dividend policy agreed by the Board of Directors and reported to the shareholders meeting.
2.25. Environment
If there are environment liabilities these are recognized on the basis of current interpretation of environmental laws and regulations, when a current obligation is likely to be incurred and the amount of that liability can be reliably estimated.
Investments in infrastructure intended to comply with environmental requirements are capitalized following the general accounting criteria for property, plant and equipment.
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2.26. Research and development
These expenses are presented in the statement of comprehensive income at line item “Administrative expenses”, and are recorded in the period in which they are incurred.
2.27. Advertising expenses
These expenses are presented in the statement of comprehensive income in the period in which they are incurred.
2.28. Earnings per share
Earnings per share are calculated by dividing the net profit attributable to the shareholders that are owners of the Company by the weighted average number of ordinary shares subscribed and paid during the year. There are no diluted dividends.
2.29. Insurance expenses for goods and services
Payments of insurance policies purchased by the Company are recognized as an expense in proportion to the period of time they cover, regardless of the payment terms. Amounts paid and not consumed are recognized within current assets as “Other non-financial assets”.
The costs of claims are recognized in the statement of comprehensive income once the amounts are known. Recoverable amounts are recognized in trade and other accounts receivable as a reimbursable asset by the insurance company, calculated according to the terms of the insurance policies, once all the conditions that guarantee their recovery are met.
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NOTE 3 – RISK MANAGEMENT
Empresas CMPC S.A. and its subsidiaries are exposed to a combination of market, financial, operating, compliance and strategic risks inherent to their business. CMPC’s Risk Management program seeks to identify and manage such critical and emerging risks, including all risks caused or intensified by climate change, in the most adequate manner to minimize potential adverse effects. CMPC’s Board of Directors establishes the general framework for the Company’s risk management, which is then implemented at the different levels of the organization. The Board supervises the risk management of CMPC and establishes committees to analyze in detail different types of risks, such as, Audit and Risks, Strategic Risks, Financial Risks, Ethics and Compliance, and Sustainability. Additionally, different management departments coordinate and control the correct execution of the prevention and mitigation policies of the main risks identified, among them are the Risk, Finance, Compliance, Sustainability and Internal Audit management departments. The main risks identified are currently divided into four general categories to improve the ease of their review and reporting: financial, strategic, operational and compliance risks.
3.1. Financial risk
The main financial risks that CMPC has identified are: commodity price risk and risk of exchange rate. However this section also includes an analysis of the credit, interest rate, liquidity and financing risks that affect the Company. These risks are controlled by the Financial Risk Committee.
The Company follows a policy of using its subsidiary Inversiones CMPC S.A. for a large portion of its financial debt, bond issuances, foreign exchange and derivatives. The purpose of this policy is to optimize resources, achieve an economy of scale, and improve operating controls.
a) Commodity prices risk
A considerable share of CMPC’s revenue is derived from products, which price depends on the prevalent conditions at international markets over which the Company has no significant influence or control. These factors include fluctuations in global demand (mainly driven by economic conditions of the most relevant economies to CMPC, such as China, North America, Europe and Latin America), variations in the industry’s installed capacity and real production, inventory levels, business strategies and competitive advantages of the main players in the forestry industry, availability of substitute products and the stage of the product’s life cycle. CMPC’s main product category is Bleached Kraft Pulp, whose sales to third parties represent approximately 34% of the consolidated sales and is distributed to approximately 349 customers approximately 48 countries in Asia, Europe, America and Oceania.
On the other hand, the Company benefits, partially, from the diversification of its business lines and the vertical integration of its operations to have some flexibility in managing its exposure to fluctuations in pulp prices. The impact of a possible decrease in pulp prices would be offset to a partial extent by the resulting reduced input cost of certain other more elaborated products, especially tissue paper and cardboard
36 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
It should be noted that the ability to redistribute the export of our products to different markets in response to potential adverse circumstances and achieve the desired price could be limited.
b) Exchange rate risk
CMPC is affected by currency fluctuations in three ways: a) its subsidiaries’ income, costs and expenses, which directly or indirectly are denominated in currencies other than its functional currency; b) exchange rate variations arising from a possible accounting mismatch that exists between assets and liabilities in the Consolidated Balance Sheet denominated in currencies other than its respective functional currency of the respective subsidiary; and c) the provision of current taxes mainly due to the investments of Softys outside of Chile and deferred taxes, mainly in Brazil, for those companies that use a functional currency distinct from its tax currency.
Exports by CMPC and its subsidiaries accounted for approximately 48% of sales of the fourth quarter of 2020, with the primary destinations being the markets of Asia, Europe, Latin America and the United States. Most of these export sales were made in dollars.
In turn, CMPC’s domestic sales in Chile and those of its subsidiaries in Argentina, Brazil, Colombia, Ecuador, Mexico, Peru and Uruguay, represented 52% of the Company’s total sales of the second quarter. These sales were primarily made in the local currency of the respective country.
On the other hand, it is estimated that the cash inflow from sales in dollars or indexed to this currency amounts to approximately 61% of the Company’s total sales. At the same time, expenses, raw materials, supplies and replacements required for continued operation, such as investing in property, plants and equipment, are also mostly denominated in or indexed to dollars.
Due to the nature of CMPC’s business, the Company’s subsidiaries make sales or acquire payment commitments in currencies other than their functional currency. In order to avoid the risk of exchange rate, hedging transactions are carried out through derivatives in order to fix the exchange rates in question. As of December 31, 2020, a significant portion of the estimated sales of cardboard and wood in Europe, in euros and British pounds, was hedged up for the current year. For the year 2021 this coverage will be executed in a smaller portion.
Considering that the structure of the Company’s revenue is highly indexed to the dollar, most liabilities have been incurred in that currency. In the case of foreign subsidiaries dedicated to CMPC’s Softys business segment, which collect receivables in local currency, part of their debt is denominated in the same currency to reduce financial and accounting mismatches. Other mechanisms used to reduce accounting mismatches are managing the currency denomination of the financial investment portfolio, occasional contracting of short-term future operations and, in certain cases, transactions using options, which are subject to limits previously authorized by the Board of Directors and represent a small amount in relation to the Company’s total sales.
From an accounting point of view, fluctuations in the exchange rate of local currencies have an impact on the deferred tax provision. This effect is caused by the difference in value of assets and liabilities in the financial accounting as opposed to the value reflected in the tax accounting when the functional currency (dollar) is different from the tax currency (local currency of the respective business unit). The main impact is derived
37 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement from the pulp segment of Brazil. Thus, devaluation in the currencies of those countries with respect to the dollar implies a higher deferred tax provision.
Although deferred taxes do not involve a cash flow, they do cause volatility in the reported financial results.
Sensitivity analysis
The Company has an active accounting exposure in relation to currencies other than the dollar, which is the Company’s functional currency. As of this date, the Company has more assets than liabilities denominated in currencies other than the dollar, including the underlying rights and obligations of current derivative contracts, in the amount of US$1,765 million as of December 31, 2020 (US$1,893 million as of December 31, 2019). In addition, if the exchange rate of these currencies (mostly Chilean pesos and Brazilian real) appreciated or depreciated by 10%, it is estimated that the effect on the Company's equity would be an increase or decrease of US$176 million calculated with figures as of December 31, 2020, same analysis performed on the figures as of December 31, 2019, estimated effect it was around at US$189 million. The effect described above would have been recorded as a credit or charge in the Reserves item for exchange difference due to conversion and as Exchange differences with effect on Profit (loss) for the period, according to the following detail:
December 31, 2020 December 31, 2019 10% 10% 10% 10% appreciation depreciation appreciation depreciation ThUS$ ThUS$ ThUS$ ThUS$ Effect of foreign currency translation differences on reserves 170,062 (170,062) 185,684 (185,684) Effect on change differences 6,444 (6,444) 3,630 (3,630) Net effect on equity 176,506 (176,506) 189,314 (189,314)
38 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
As of December 31, 2020 and December 31, 2019, the Company has assets in Brazil, which functional currency for financial purposes is the dollar and for tax effects is Brazilian real. This generates temporary differences due to the variation of the mentioned currency. It should be noted that, as the previous sensitive analysis, this analysis is prospective using the closing figures of the corresponding periods. Below is the sensitivity analysis of this concept:
December 31, 2020 December 31, 2019 10% 10% 10% 10% appreciation depreciation appreciation depreciation ThUS$ ThUS$ ThUS$ ThUS$ Effect on income tax expenses 48,046 (39,310) 68,145 (68,145) c) Interest rate risk
The Company's financial investments bear interest primarily at fixed interest rates, eliminating the risk of changes in the market interest rate. Financial liabilities are mostly at fixed interest rates. For debt with variable interest rates, CMPC minimizes the risk by using derivative instruments, thereby managing to fix the interest rate for approximately 97% of the debt. It should be noted that the remaining 3% correspond mainly to debt in Brazilian reals.
d) Credit risk
Credit risk arises primarily from the potential insolvency of certain customers of CMPC´s subsidiaries and the consequent inability to collect on outstanding accounts receivable and finalize transactions.
In order to minimize its exposure to credit risk, CMPC through its subsidiaries, has signed credit insurance policies that cover a significant portion of sales, both export and local. The insurance policies that the Company holds are provided by Atradius Credit Insurance NV (rated A2 according to the credit rating agency Moody’s) and Compañía de Seguros de Crédito Continental S.A. (rated AA- according to both Humphreys and Fitch Ratings credit rating agencies). Both policies have a coverage of 90% and 85%, respectively of the amount of each invoice, for preferential and non-preferential clients. Additionally, CMPC also has at its disposal letters of credit and other instruments which allow to ensure and mitigate the credit risk.
Furthermore, the CMPC Corporate Credit Committee is in charge of supervising and evaluating on a regular basis its clients’ ability to pay, as well as managing the granting, rejection or modification of clients’ lines of credit. For that purpose, CMPC has a Credit Policy applicable to all of its subsidiaries, which allows control and management of the credit risk of forward sales.
39 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Accounts receivable according to coverage as of December 31, 2020 and December 31, 2019, are detailed as follows:
12/31/2020 12/31/2019 % % Credit Insurance or Letters of Credit 95% 81% Not covered 5% 19% Accounts receivable 100% 100%
Effective management of credit risk and wide distribution and diversity of sales has resulted in very low customer portfolio credit losses, which in the current period amounts to 0.07% of sales (0.05% of sale as of December 31, 2019)
There is also credit risk in the execution of financial operations (counterparty’s risk). Counterparty’s risk arises when there is a likelihood that the counterparty to a financial contract will not be able to fulfill the financial obligations to the Company that it has incurred. To reduce this risk in its financial operations, CMPC establishes individual exposure limits by financial institution, approved periodically by the Board of Directors of Empresas CMPC S.A.
40 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The financial institutions in which CMPC has investments are detailed as follows:
12/31/2020 12/31/2019 Issue r Portfolio % ThUS$ Portfolio % ThUS$ BNP Paribas New York - United States 17.75% 167,112 6.77% 40,000 MUFG Bank, Ltd. - United States 14.35% 135,066 19.35% 114,399 Banco Sumitomo Mitsui Banking Corporation 10.10% 95,089 - - JP Morgan Chase Bank, N.A. - United States 9.44% 88,887 0.50% 2,939 Scotia Corredores de Bolsa Chile Ltda. 7.47% 70,329 2.85% 16,874 Banco Itaú - Brazil 7.16% 67,453 2.13% 12,594 BancoEstado S.A. Corredores de Bolsa - Chile 5.48% 51,551 - - Banco Itaú Corpbanca - Chile 5.31% 50,016 5.10% 30,154 Citibank N.A. N.Y. - United States 4.07% 38,302 19.67% 116,303 Goldman Sachs Bank - United States 3.19% 30,052 - - Banco de Crédito del Perú 2.28% 21,460 2.18% 12,860 Banco Santander - Brazil 2.13% 20,033 5.00% 29,586 Banco Safra S.A. - Brazil 1.48% 13,938 3.33% 19,665 Banco Santander - Chile 1.47% 13,861 1.56% 9,226 Banco BBVA - Peru 1.37% 12,854 1.64% 9,668 Caixa Econômica Federal - Brazil 0.99% 9,337 1.35% 7,990 Banco Nacional de México, S.A. 0.81% 7,633 1.33% 7,854 Scotiabank - Chile 0.71% 6,660 8.51% 50,279 Banco do Brasil 0.51% 4,847 0.85% 5,002 Citibank N.A. N.Y. - England 0.51% 4,777 0.09% 508 Banco Bradesco S.A. - Brazil 0.40% 3,802 0.51% 3,043 Scotiabank - Peru 0.40% 3,732 0.12% 682 Banco BCI - Chile 0.39% 3,704 10.20% 60,294 Banco de Chile 0.38% 3,576 0.52% 3,045 Goldman Sachs International - United Kingdom 0.34% 3,171 - - Banco Santander - Mexico 0.28% 2,638 0.04% 259 Citibank - Peru 0.26% 2,428 0.35% 2,066 Morgan Stanley & Co. International plc - England 0.18% 1,740 - - Galicia Administradora de Fondos S.A. - Argentina 0.17% 1,577 0.33% 1,928 BNP Paribas - Francia 0.15% 1,440 0.12% 733 Bancolombia 0.13% 1,196 - - Bank of America, N.A. - United States 0.11% 1,000 - - Bank of America, N.A. - England 0.07% 702 0.04% 233 Scotiabank Inverlat S.A. - Mexico 0.06% 543 0.33% 1,931 Macquarie Bank Ltd. - Australia 0.04% 333 - - JP Morgan Chase Bank, N.A. - England 0.03% 290 0.03% 165 Banco Monex, S.A. - Mexico 0.02% 164 0.02% 141 JP Morgan Chase Bank, N.A. - Brazil 0.01% 81 0.17% 982 Banco Banrisul - Brazil 0.00% 26 0.00% 18 Banco de la Producción S.A. Produbanco - Ecuador 0.00% 20 0.00% 32 Bank of America Merrill Lynch Banco Múltiplo S.A. - Brazil 0.00% 4 0.67% 3,983 Banco MUFG Brasil S.A. 0.00% 1 0.41% 2,448 Banchile Corredores de Bolsa S.A. - Chile - - 3.92% 23,169 BBH & Co. Money Market Fund - United States - - 0.01% 116 Subtotal 100.00% 941,425 100.00% 591,169 Plus: cash and bank accounts 24,549 42,710 Total cash and cash equivalents + other current and 965,974 633,879 non-current financial assets
41 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement e) Liquidity risk
This risk refers to the eventual inability of the Company to fulfill its obligations as a result of insufficient liquidity. CMPC manages this risk through the appropriate distribution, extension of due dates and limits on the amount of its debt, as well as by maintaining a liquidity reserve and management of its operational and investment cash flows.
The Company, as previously mentioned, has a policy of concentrating its financial debt in the subsidiary Inversiones CMPC S.A. which finances the operating subsidiaries. Debt is primarily incurred through bank loans and bonds placed in international markets and in the local Chilean market.
The Company maintains financing in currencies other than U.S. dollar, which are hedged into the functional currency through derivative contracts (hedge accounting). These instruments may have temporary differences that require the delivery of collaterals if the market value of those instruments exceeds certain threshold previously agreed with the counterparties of the hedges. This may temporarily affect liquidity.
To maintain an adequate reserve of liquidity, in addition to the effective cash position held by the Company, in March 2017, the subsidiary Inversiones CMPC S.A. obtained a Committed Line of credit with Banco Santander, Export Development Canada, Scotiabank & Trust (Cayman) Ltd. and MUFG Bank, Ltd., acting as structurer. This credit line amounted to ThUS$400,000 with a maximum maturity of 3 years. In August 2018, this committed credit line was extended for two additional years (from September 13, 2020 to September 14, 2022) for a total amount of ThUS$200,000 with Banco Santander y Export Development Canada, Scotiabank & Trust (Cayman). Additionally, in August 2020 the Company obtained a Committed Credit Facility of ThUS$100,000, structured as a Sustainability-Linked and Syndicated Loan from BNP Paribas, MUFG Bank, Ltd., Sumitomo Mitsui Banking Corporation, and Export Development Canada. As of December 31, 2020, both credit facilities are fully available.
The financial policy followed by CMPC, contained in its financial objectives policy, along with its strong competitive position and high quality assets, enables Empresas CMPC S.A. to have an international credit rating of BBB- according to Standard & Poor’s (stable outlook), Baa3 according to Moody’s (stable outlook) and BBB according to Fitch Ratings (stable outlook) one of the best ratings in the forestry, pulp and paper industry in the world.
It should also be noted that the Board of Empresas CMPC S.A. together with its management, have established a policy of financial objectives, beyond those required by creditors in order to maintain a solid financial position.
The Financial Objectives Policy considers the following criteria: i) Cash (*) > debt amortization + finance costs in the next 18 months. ii) Net financial debt (**) / EBITDA between 2.5 to 3.5: The objective of CMPC is to be in the lower part of the range indicated in ii) however, this indicator may fluctuate within the range, especially during and after periods of significant investments and / or cycles of low pulp prices. iii) Financial debt with third parties (***) over equity (adjusted for contracts) < 0.50. iv) LTM Interest Coverage for 12 months [(EBITDA + Financial Income) / Financial Costs] > 5.0 times.
42 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(*) Cash: Cash and cash equivalents plus time deposits over 90 days (see Note 8). Additionally, all the committed and non-disbursed lines that CMPC maintains with one or more Financial Institutions will be considered. (**) Net financial debt: financial debt with third parties less cash. (***) Financial debt with third parties: total interest bearing loans - other obligations + liabilities on swap and cross-currency swap operations + hedging liabilities - assets on swaps and cross-currency swaps - hedging assets (see Note 22 letter e).
The Board of directors and Management constantly monitor compliance with these objectives. If the net financial debt / EBITDA reaches 4 times, the necessary measures are taken to assure that this indicator falls below the expected limit within the next 6 months.
As of December 31, 2020 and December 31, 2019, Empresas CMPC S.A meets fully with all the established financial objectives. f) Financing risk
In addition, the ability to have access to loans and credit facilities in local or international capital markets may be restricted, because of external reasons when financing is needed, which could have adverse material effects on our flexibility when reacting to several economic and market conditions.
3.2. Strategic risks a) Water availability for industrial processes
Water is an indispensable and strategic resource for the Company‘s industrial operations. Climate change could have an impact on the availability of this resource due a prolonged decrease in precipitations and a less accumulation of mountain water in the watersheds, which could lead to a situation of chronic drought.
CMPC develops diagnoses for the availability and evolution of the water resource, studies new technology and processes in order to reduce its industrial water use. The Company’s specific goal is to reduce water use in its industrial processes by 25% by 2025, which is monitored according to annual progress. b) Rural fires
In recent years, the conditions for the emergence and spread of rural fires have increased. It can directly impact forest plantations affecting the availability of fiber, neighbouring communities and/or the environment.
The Company counts with an annual prevention plan and fire fighting systems to reduce their impact. Annually the Company invests an important budget in prevention, fighting and training. In this matter, the relationship plan with neighboring communities is especially relevant, which generates a virtuous association in terms of prevention and early detection. c) Fiber availability
Less precipitation can affect fiber availability, since it is a fundamental climate condition in the growth and yield of plantations. Other natural events that impact availability can be strong winds or pests. Additionally,
43 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement fires and wood theft can affect fiber availability. Depending on the intensity of these events, a loss of forest heritage can be generated that could impact the availability of wood fiber for operations and sales.
The Company, through management and genetic improvements, has managed to increase the platation yield, but it is not exempt from risks due to significant changes in environmental conditions. Additionally, it implements permanent prevention actions against exogenous factors such as fires or wood theft. Some of these potential events have partial insurance coverage, with limitations for dedutibles and maximum compensable, determined in accordance with the historical losses and the levels of prevention and protection established. d) Relation with the community and social license to operate
CMPC runs forestry and industrial operations in different geographical locations in Latinamerica. It is important for the Company to maintain good relations with the community, which is why it considers a risk that these deteriorate, due to a possible loss of the social license to operate.
In these situations, CMPC has a community relations policy, which aims to contribute to the environmental and social sustainability of its surrondings based on three elements: outdoor life, education and entrepreneurship, including support for local micro-business initiatives, among other actions. Also, noteworthy are the initiatives developed with more than 385 communities of the Mapuche people in Chile. e) Geopolitical and economic conditions
Changes in the political or economic conditions in the countries where CMPC operates could affect the Company's financial and operating performance, as well as the fulfilment of its business plan. CMPC has industrial operations in 11 countries. Those located in Chile account for 58% of total assets and originate 50% of sales. In turn, Brazil represents approximately 30% of CMPC's total assets and gives rise to 25% of CMPC's sales.
The Company periodically analyzes changes in economic and political conditions that could affect it, establishing action plans to face new conditions. f) Positioning of the forest industry
The Company identifies the risk of failing to position the relevance of the forest, use of biofuels and the generation of bioproducts in society, as well as the opportunities to develop a better position regarding the current condition. All these investments have a risk of not being correctly evaluated, or that the assumptions and scenarios considered in the evaluations do not occur as budgeted.
CMPC has different levels of review and approval of investment projects and acquisitions. In addition to this, it has an innovation area dedicated to the search for renewable resource solutions that meet the needs of customers and generates alliances that contribute to positioning the relevance of the forest in society. g) Acquisitions and investment projects
44 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
CMPC has an important investment plan and performs projects that involve significant disbursements. Additionaly it bases its growth not only on organic growth, but also evaluates, and can carry out, acquisitions of businesses or companies. All these investments have a risk of not being properly evaluated, or have the risk that the assumptions and scenarios considered in the evaluations do not occur as they were budgeted.
CMPC has defined an investment project evaluation methodology where different levels of review and approval of projects and acquisitions are identified. h) Product innovation for the market
Generation of new ways of working, new products and businesses in which CMPC is not present today, incorporating efficiency and effectiveness. CMPC identifies as critical the risk associated with not innovating in relation to the competition, not anticipating opportunely the needs of the market or the appearance of substitutes that offer a better or more sustainable alternative to its products.
CMPC is carrying out a program called Beyond, led by the Innovation Management, through which it is giving a strong boost and importance to innovation at all levels of the company. With Beyond, it is expected to improve the capacities and culture of innovation, as well as the need to have a special orientation towards the market and customers, among many other initiatives. i) Knowledge and talent management
Part of the company's competitive advantages, and its future perspectives, depend on knowledge management and the retention and attraction of talets. CMPC identifies knowledge and talent management as fundamental and strategic. Its proper management not only prevents the risk of loss of knowledge and the inability to retain or attract talents, but also allows being proactive, capturing the various associated opportunities.
The Company is implementing a series of initiatives led by the People Management with the objective of attracting, retaining and developing talent in the organization.
3.3. Operational risks a) Cyber Risk
The use of technological solutions (software, hardware and connectivity) that support different organizational and productive processes, added to constant attacks on private and government networks, implies being more exposed to this risk. If these risks materialize, they can have a significant impact on the continuity of operations, as well as problems in the internal (collaborators) and external (suppliers) chain of payments. On the other hand, it could affect relations with its customers by not meeting its business requirements.
CMPC and its main computer service providers have contingency plans and have adopted measures to prevent or mitigate the impact of events such as interruptions, failures or breaches, due to causes such as se c urity breaches, computer viruses or cybersecurity attacks. Part of these plans and contingencies have been to reinforce and decentralize the datacenter, have a 24/7 Security Operation Center (SOC) service, among others.
45 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
On the other hand, management has been carried out with CMPC employees, which consists of constantly training them, with the aim of informing and reinforcing how to act in situations related to this risk. b) Occupational accidents or illnesses
Any situation that may imply a risk to the health and safety of CMPC's employees, both direct and indirect, represents a very important concern for the Company, and is therefore considered one of the main risks. Although accidents can occur without irreversible damage, or even without lost time, there is a risk of accidents that could imply irreparable damage to the health of workers, or even fatal accidents, which is why it is a matter of extreme relevance in the Company.
Models focused on preventing accidents or illnesses that could mean irreversible damage or fatality are extremely important. The Company has methods to identify situations or potential events that can translate into accidents or illnesses of employees and implements measures to prevent them, in charge of specialists in occupational safety and health in the different production plants and forestry operations. c) Fires or explosions in industrial facilities
In the operation of the plants, incidents related to fires and/or industrial explosions could occur, if the operating parameters and/or safety measures are not managed. If this risk materializes, it could have negative consequences for workers and for the operational continuity of the affected assets, generating stoppages that affect production goals and the ability to meet customer needs, as well as unscheduled disbursements to meet the emergency and repair assets, which can affect financial results. The reputation of the company, the environment and the relationship with neighboring communities would also be affected.
The Company must identify the causes and scenarios that can cause fires or explosions with high impact consequences, regardless of the probability of their occurrence, analyzing and determining the critical preventive controls that allow them to be eliminated or reduced. The company has contracted insurance coverage through which it transfers a substantial part of the economic impacts of this risk. d) Natural disasters and pandemics
Natural disasters and pandemics are events which causes are not manageable by companies. Global warming should imply a greater frequency and/or intensity of acute natural events, and globalization could facilitate the spread of viral outbreaks, turning epidemics into pandemics. If it materializes, it can have a significant impact on the continuity of operations, generating stoppages that affect production goals and the ability to meet customer needs. In addition, they can force unscheduled disbursements in asset maintenance and recovery, all of which can adversely affect CMPC's financial results.
The management of this risk is oriented to the consequences, through controls and mitigating measures, which includes emergency plans applicable to the facilities and to protect people, operational continuity plans to mitigate the effects on the operation, and plans of occupational health and safety to face possible epidemics or pandemics. The Company has contracted insurance coverage through which a substantial part of the economic impacts of this risk is transferred. e) Environmental incidents
46 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The operation of industrial plants could produce an environmental incident if the operating parameters go outside the established ranges.
The potential occurrence of environmental incidents or accidents can affect people and the environment, in addition to involving possible sanctions, stopping the operation and damage to the reputation of the Company.
CMPC continuously manages people, processes and facilities to prevent the occurrence of environmental incidents and identify opportunities for improvement. In turn, it has methods that, in the event of an event, allow an emergency situation to be dealt with in a timely and effective manner and with processes to trace the causes to their origin and implement corrective actions that minimize the impact. In addition, CMPC’s guidelines are aimed at ensuring the use and care of renewable natural resources: water, air and soil and other components in order to prevent environmental impacts resulting from the operation. The Company has contracted insurance coverage through which a substantial part of its environmental and civil liability risks is transferred. f) Critical equipment failures
There are certain equipment that is essential for the production of the Company's goods, and if it fails, it could affect the operational continuity of industrial plants, and thus put the supply of products to customers at risk.
Under certain conditions, the failure of critical equipment could even affect the health and safety of workers and/or the environment. A critical equipment could fail as a result of causes associated with natural phenomena or other exogenous causes.
CMPC has scheduled maintenance standards and objectives to try to avoid equipment obsolescence, in order to manage the risk of failure. Additionally, the management of this risk considers the implementation of operational continuity plans to mitigate the impact in the event that the risk materializes, either due to endogenous or exogenous causes. The Company has contracted insurance coverage through which a substantial part of its industrial risk is transferred. g) Attacks against physical assets
In Chile, the occurrence of attacks against forestry operations and other industries is a reality, mainly against physical assets, but also sometimes physically and/or psychologically affect workers. There is a risk that situations like these will have greater frequency and severity, even affecting operational continuity and supply to customers and people, but there is also the opportunity that exposure to this risk will decrease over time.
Companies are not responsible for combating attacks, however, in order to prevent and mitigate any damage to direct and indirect workers and to the Company's assets, CMPC has carried out analyzes to know the risk profile of all industrial plants, facilities and forest heritage, and maintain an updated registry of their level of exposure. The Company defines alert criteria to be monitored and security measures that help protect people and assets. The Company has contracted insurance coverage through which a substantial part of the economic impacts of this risk could be transferred.
47 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
3.4. Compliance risks a) Corruption and affectation of free competition
Compliance risks are associated with the Company’s ability to comply with legal, regulatory, contractual, and standards that are self-imposed in.
Any situation that may affect compliance with anti-corruption laws or the protection of free competition is considered high-impact.
The ones in charge of Corporate Governance at CMPC regularly review its operation and administration processes in order to ensure proper compliance with the laws and regulations applicable in each country of operation. A permanent work has been developed to take actions aimed at strengthening the control processes and systems to prevent the occurrence of acts of corruption, both internal and public, in addition to protecting free competition. Within the framework of this constant concern, international best practices have been adopted and corporate governance structures modified, in order to make more efficient and deepen the efforts described. Along with the existence of Board Committees that oversee the correct identification and mitigation of these risks, there are corporate areas with a high level of independence that interact transversally in these processes, to make the controls and preventive actions defined more effective. b) Environmental regulatory changes
CMPC’s operations are regulated by environmental standards in all countries where it operates, and these standards may change over time, affecting the Company’s obligations. Any future change to environmental regulations may have an impact on the Company’s operations, as they may imply modifying production processes or require new investments, to be in compliance with possible new regulations.
CMPC has been characterized by operating under a sustainable development framework in its business management, which has meant the voluntary adoption of compliance standards that are generally str icter than required than those established in local legal regulations. This has enabled the Company to adapt to modifications in environmental legislation and meet the new requirements.
In 2019, the Company announced medium and long-term sustainability goals. With these efforts, it seeks to mitigate the effects of climate change and anticipate regulatory environmental changes that could have adverse effects on its business and corporate finances, as well as identifying and taking advantage of opportunities that arise.
3.5. Emerging Risks
Among the main risks identified, there are some that could involve new forms of materialization, different from those currently identified and known. For example, within the main risks, the following are identified: a) Natural disasters or extreme events of nature
48 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The climate crisis could imply that the type and frequency of these is different from what has been seen in recent years. Along the same lines, the pandemic caused by Covid-19 has shown that events of nature that were not anticipated previously can be experienced, and that they emerge in an unexpected manner and that can affect the operation of companies. Furthermore, the climate crisis could favor, in certain sectors, the spread of rural fires.
Additionally, teleworking and the increase in digitization imply a greater exposure to Cyber Risk. Companies must anticipate new forms of exposure to this risk, in such a way that they can be prevented, or at least mitigated in their impacts on systems, processes, fixed assets, etc.
NOTE 4 - ACCOUNTING ESTIMATES AND JUDGMENT
Estimates and judgments are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The preparation of consolidated financial statements under IFRS requires estimates and judgments involving the measure of assets and liabilities, potential exposure to contingent assets and liabilities, and amounts of income and expenses during the period. Consequently, actual results later observed could differ from these estimates.
The accounting principles and areas requiring the use of estimates and judgments in the preparation of the financial statements are biological assets, termination benefits obligations, litigation, other contingencies, useful lives, impairment testing, fair value of derivative contracts or other financial instruments and the determination of a lease terms.
4.1 Biological assets
To determine fair value, CMPC has developed a valuation model that estimates the current value of a forest plantation using the discounted cash flow (NPV) model. This methodology requires the use of economic and forestry assumptions that imply a high level of professional judgment on the part of the Management. Any change in the parameters or assumptions that are applied in the model would generate an appreciation or devaluation in the current valuation of forest plantations.
This model establishes fair values, in dollars, per stand and species, considering different estimations (variables) such as:
Exchange rates (short and long term) Type of product Short and long-term harvest program Lumber price levels Discount rate Costs of establishment, administration, harvest, transport and roads Dasometric information to estimate plantation growth among others
49 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
These measurements are classified in Level III according to the requirements of IFRS 13, considering the main data are not observable in the market.
Certain parameters used in the valuation of forest plantations are based on market information. These include prices of the different products marketed, in addition to the costs of harvest, transport and roads. These parameters are the same as those used by the farm purchase team to value the new forests that the Company acquires in the market from third parties.
The Management carries out periodic reviews of the variables that affect the valuation of forest plantations.
4.2. Obligations for post-employment benefits and other actuarial liabilities
The Company has actuarial commitments related to: i) Compensation for years of service (Chile), iii) Seniority awards (Chile) iii) Benefits for medical assistance (Brazil).
The provision originated by these concepts is measured according to actuarial techniques, using a methodology that considers a series of economic and demographic assumptions, mainly:
- Discount rate - Labor turnover rate - Salary growth rate - Retirement age - Mortality rate - Disability rate - Estimated inflation rate - Estimated medical inflation rate
This value, thus determined, is presented at the actuarial value using the projected unit credit method.
For compensation for years of service and seniority awards, in Chile, CMPC obtains, in a compound form, the annual nominal discount rate based on the yields of the bonds of the Central Bank of Chile in CLP, at similar terms or interpolations thereof. The turnover rates have been determined by reviewing the Company's own experience, considering each subsidiary´s independent turnover rates. Assumptions regarding salary increases are based on market expectations and forecasts, while withdrawals for men and women depend on the age of retirement legally established in the region. The mortality rate and the disability rate used for the actuarial calculations are directly derived from the mortality tables issued by the CMF, understanding that these are an appropriate representation of the Chilean market.
In the case of benefits for medical assistance, in Brazil, the discount rate is determined based on the performance of long-term government securities of the Brazilian government, while the estimated rate of medical inflation and mortality depends on rates prepared by study institutions in level of health and social welfare.
4.3. Litigation and other contingencies
50 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
CMPC is involved in various lawsuits for which it cannot accurately determine the possible economic effects on the financial statements in the event of one more unfavorable outcome. In cases where management and the Company's legal counsel believe that favorable results will be obtained, or that the results are uncertain and the lawsuits are pending sentencing, no provisions have been established. In cases where the opinion of the Company’s management and legal counsel is totally or partially unfavorable, provisions have been recognized in “Other gains (losses)” based on estimates of the most likely amounts payable.
The lawsuits and contingencies are detailed in Note 25 to these Consolidated Financial Statements.
51 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
4.4. Useful lives and impairment testing of property, plants and equipment and intangible assets
Property, plant and equipment and intangible assets are depreciated and amortized on a straight-line basis over the useful lives that Management has estimated for each of these production assets. An estimate of the useful life might change significantly as a consequence of technological innovations and actions by competitors in response to significant changes in the industrial sector. Management reviews the technical useful life of the assets annually.
Management considers that the assigned values and useful lives, as well as the assumptions used, are reasonable.
In addition, in accordance with IAS 36 “Impairment of Assets”, as of each period, or earlier if there is any indication of impairment, CMPC evaluates the recoverable value of property, plant and equipment, grouped in cash generating units (CGUs), including the determined proportional goodwill, to verify whether there are impairment losses in the value of the assets. If, as a result of this evaluation, the fair value is lower than the net carrying amount, an impairment loss is recorded as an operating item in the statement of comprehensive income.
4.5. Fair value of derivative contracts or other financial instruments
The fair value of financial instruments not traded at an active market is determined using valuation techniques commonly accepted in the financial market, which are based mainly on market conditions existing as of the date of each financial statement.
These valuation techniques consist of comparing market variables agreed at the inception of a contract to market variables at the time of valuation to calculate the present value of such differences, by discounting future cash flows at relevant market rates, which determine market value as of the valuation date.
4.6. Determination of the lease term
Management applies its judgment and best estimation to determine the lease term for lease contracts that include any renewal options. The evaluation was performed using the best estimation as of the date of the current consolidated financial statements considering the determination if such assets is critical and specific for the operations of the Group. The strategic plan of each subsidiary and holding was reviewed to ensure the reliability of the estimate.
The estimate of applying these options has an impact on the lease term, which affects the liability of the lease and the asset of recognized right of use.
The Management considers that the terms of assigned contracts are reasonable as of the date of issuance of these consolidated financial statements.
52 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 5 – CHANGES IN ACCOUNTING POLICIES
The Consolidated Financial Statements as of December 31, 2020 do not present changes in accounting policies regarding to the Consolidated Financial Statements as of December 31, 2019.
NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS
The following new accounting pronouncements had effective application as of December 31, 2020:
Standards, interpretations and amendments Mandatory application to: Conceptual Framework: Amendments to references in the Annual periods beginning on or after January 1, 2020 Conceptual Framework for Financial Information. Amendments to IFRS 3: Business Combination – Definition of a Annual periods beginning on or after January 1, 2020 business Amendments to IAS 1 and IAS 8: Definition of material or relative Annual periods beginning on or after January 1, 2020 importance Amendments to IFRS 9, IAS 39 and IFRS 7: Reform of the Annual periods beginning on or after January 1, 2020 Reference Interest Rate Amendments to IFRS 16: Reductions of rent related to COVID-19 Annual periods beginning on or after June 1, 2020
The application of these accounting pronouncements has not had significant effects for CMPC. The rest of the accounting policy applied during the year 2020 has not varied with respect to those used in the previous year.
As of the date of issuance of the consolidated financial statements, the following accounting pronouncements have been issued by the International Accounting Standards Board (“IASB”):
Standards, interpretations and amendments Mandatory application to: IFRS 17: Insurance contracts Annual periods beginning on or after January 1, 2023 Amendments to IAS 37: Onerous contracts – Contract compliance Annual periods beginning on or after January 1, 2022 costs Annual improvements to Norms IFRS 2018-2020 Annual periods beginning on or after January 1, 2022 Amendment to IAS 16: Property, plant and equipments – Income Annual periods beginning on or after January 1, 2022 before expected use Amendments to IAS 1 Classification of liabilities as current or non- Annual periods beginning on or after January 1, 2023 current Amendments to IFRS 10 and IAS 28: Sale or contribution of To be determined assets between an investor and its associate or joint venture Amendment to IFRS 3: Reference to Conceptual Framework Annual periods beginning on or after January 1, 2022 Amendment to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Annual periods beginning on or after January 1, 2021 Reform of the reference interest rate fase 2
These accounting pronouncements issued not yet effective are not expected to have a significant impact on the Company's consolidated financial statements.
53 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 7 - FINANCIAL SEGMENT REPORTING
Operating segments are reported in a manner consistent with the presentation of internal reports used by the Management in the business analysis, management control and decision making process.
CMPC designates business segments based on product differentiation and financial information made available to final decision makers, as relates to matters such as profit measurement and investment allocation.
Operating segments thus determined are detailed as follows:
Pulp
Pulp: The activities in this business area are carried out by subsidiary CMPC Celulosa SpA This subsidiary operates 4 production lines in Chile and 2 in Brazil, through its subsidiary CMPC Celulosa Riograndense Ltda., with total annual production capacity of approximately 4.1 million metric tons of pulp (plus 121,000 tons of paper of different kinds and weights). Pulp installed production capacity is 800,000 tons of bleached softwood kraft pulp (BSKP, using Radiata pine lumber), including 32,000 tons of non-bleached pulp (UKP) and 3.2 million tons of bleached hardwood kraft pulp (BHKP, using eucalyptus wood). All of them have established standards of processes, quality, environment and people's safety. In addition, the plants in Chile have their chain of custody certified under FSC and CERTFOR-PEFC standards, guaranteeing that their raw materials come from cultivated forests or controlled origin plantations, free of controversies and perfectly traceable from the forest up to their final destination
Of the total pulp produced, approximately 690,000 tons are sold to subsidiaries and the difference is exported from Chile and Brazil to more than 220 customers in America, Europe, Asia and Oceania. CMPC Pulp SpA is positioned among the leading companies in the world industry and has an efficient logistics network, which enables it to provide excellent dispatch services to its customers. The main external markets are based in Asia (China and South Korea), Europe (Italy and Germany) and America.
The subsidiary Bioenergías Forestales SpA is also part of this segment, which commercializes the surplus electrical energy, and purchases energy for units that require energy from the market.
Forestry: The forestry segment reported by CMPC corresponds to its business, led by its subsidiary Forestal Mininco SpA, which has the mission of managing the Company’s forest resources and managing the solid lumber business. Its main products are the sawn lumber, remanufactured products and plywood sheets.
CMPC currently has more than 654,000 hectares of forest plantations, mainly pine and eucalyptus, of which 459,000 hectares are located in Chile, 141,000 hectares in Brazil and 54,000 hectares in Argentina. In addition, the company has 65,000 hectares to plant; 48,000 hectares are located in Chile, 11,000 hectares in Argentina and 6,000 hectares in Brazil. In addition, the Company has usufruct, sharecropping and lease contracts with third parties comprising approximately 106,000 hectares of forest plantations distributed in Chile and in Brazil. The Company's forest plantations have CERTFOR-PEFC (Chile), CERTFLOR-PEFC (Brazil) and FSC (Chile and Brazil) certification.
54 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The main customers of wood logs are industrial pulp factory, remanufactured products and plywood sheets of the Company.
Lumber: Subsidiary CMPC Maderas SpA is responsible to manage the solid lumber business and their main products are sawn lumber, remanufactured products and plywood. It has three sawmills in Bío-Bío, Chile: Bucalemu, Mulchén and Nacimiento with annual production capacity close to 920,000 cubic meters of sawn lumber, of which it exports approximately 50%. It also has two remanufacturing plants, in Coronel and Los Ángeles, Chile, which are capable of producing approximately 190,000 cubic meters of products manufactured from dry sawn lumber (moldings, sheets and laminates), and one plywood plant with an annual capacity of 500,000 cubic meters, of which approximately 70% is exported.
Regarding lumber products, the main external export markets of the sawn lumber products are Asia, the Middle East and Latin America for their use in packaging, furniture and construction segments. Also, Plywood's main export destinations are North America, Latin America, Europe and Oceania for various uses, such as construction, furniture and other industry-related. In the case of remanufacturing, almost all exports are intended for North America (United States), which are sold in the retail and distribution channels for the construction segment.
Biopackaging
This business area consists of ten subsidiaries with commercial operations and a Holding that groups them. One of them participates in the production and marketing of cardboard and another produces paper for corrugation. There are six subsidiaries whose line of business is manufacturing and marketing elaborated paper products, such as corrugated cardboard boxes, bags or industrial sacks and molded pulp trays. Finally, this business area also has a subsidiary specializing in the distribution of paper and another dedicated to paper recycling.
The subsidiary Cartulinas CMPC SpA operates the plants of Maule (Maule Region in Chile) and Valdivia (De los Ríos Region in Chile) which have a capacity to sell 530,000 tons of cardboard annually to 45 countries in Latin America, Europe, Asia, North America and Oceania.
The subsidiary Papeles Cordillera SpA, located in Puente Alto (Metropolitan Region of Chile), markets a variety of papers for corrugation and for plasterboard. This subsidiary currently has a paper machine, with the capacity to produce 260,000 tons of corrugated paper per year based on recycled fibers.
The corrugated cardboard boxes business is addressed through Envases Impresos SpA, which manufactures cardboard boxes for the fruit and winemaking sectors and for the salmon industry in its three plants in Chile. Two are located in the Metropolitan Region, in Buin and Til-Til and the third one in Osorno (Los Lagos Region).
Subsidiary Chilena de Moldeados SpA, whose plant is located in Puente Alto (Metropolitan Region of Chile) manufactures and markets molded pulp trays destined to the exporting of apples and avocados, and egg trays and cases.
55 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The multi-ply paper sacks business is operated by subsidiary Forsac SpA in Chile with a plant in Chillán (Bío- Bío Region of Chile); Fabi Bolsas Industriales S.A. in Argentina is located in Hinojo; Forsac Perú S.A., operates in Lima, and Forsac México S.A. operates in Guadalajara e Irapuato, the latter incorporated into the Company in June 2020 with the acquisition of the company that produces paper bags, Samcarsa de México S.A. de C.V. The different specific facilities serve local markets, especially the cement and construction materials industry, and there are also exports to various countries in Latin America and the United States.
In addition to these paper production subsidiaries, the segment includes Distribuidora de Papeles y Cartones SpA, a distribution company in charge of marketing paper in the Chilean market and Sociedad Recuperadora de Papel SpA, a company that is responsible for collecting used cardboard boxes in Chile to be recycled as raw materials in CMPC Tissue SpA, Chilena de Moldeados SpA and Papeles Cordillera SpA.
Softys
This business segment is engaged in the production and selling of tissue products (toilet paper, paper towels, paper napkins and facial tissues), sanitary products (baby diapers, wipes, adult diapers and sanitary napkins) and specialized hygiene products for consumption in institutions and public places, in Chile, Argentina, Brazil, Colombia, Ecuador, Mexico, Peru and Uruguay.
The main production and marketing subsidiaries in this segment are CMPC Tissue S.A. (Chile), La Papelera del Plata S.A. (Argentina), Melhoramentos CMPC Ltda. (Brazil), Productos Tissue del Perú S.A. (Peru), Papelera Panamericana S.A. (Peru), Industria Papelera Uruguaya S.A., Absormex CMPC Tissue S.A. de C.V. (Mexico), Protisa Colombia S.A., Drypers Andina S.A. (Colombia) and Productos Tissue del Ecuador S.A. (Ecuador).
CMPC’s Softys business offers a wide range of products in terms of quality and price in the categories in which it operates. Products are mainly sold under its own brands, which have achieved high levels of recognition by consumers.
56 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Elite® is the regional trademark used by CMPC Tissue. Similarly, Confort® and Nova® in Chile and Higienol® and Sussex® in Argentina are the leading brands in their markets in the categories of toilet paper and paper towels, respectively. Disposable diapers for babies and adults, wipes, and sanitary napkins are marketed under the trademarks Babysec®, Cotidian® and Ladysoft®, respectively. In addition, as a result of the acquisition of Sepac - Serrados e Pasta e Celulose Ltda., important brands such as Duetto ® have been incorporated in Brazil.
Softys reaches its consumers through a wide distribution network, highlighting supermarkets, pharmacies and distributors.
Others
The results (income and expenses) from other areas than the segments mentioned above, referring to general administration services (innovation, business development, legal, corporate affairs, etc.) are not transferred to the operating segments, and are presented under “Other” and represent results that at majority are expenses (such as finance, accounting, IT and remunerations) that are invoiced to the subsidiaries based on the current service agreements.
57 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The Consolidated Statement of Comprehensive Income by business area as of December 31, 2020 is as follows:
Business areas (operating segments) ThUS$ Adjustments Total Concepts Pulp Biopackaging Softys Others (1) and Total CMPC segments eliminations Balance as of December 31, 2020 and for the year then ended Revenue from external customers 2,347,617 871,515 2,067,795 5,286,927 - - 5,286,927 Revenue between operating segments of the same entity 247,368 16,844 1,672 265,884 27,331 (293,215) - Revenue from external and related customers 2,594,985 888,359 2,069,467 5,552,811 27,331 (293,215) 5,286,927 Cost of sales (2,440,176) (756,447) (1,473,385) (4,670,008) - 246,509 (4,423,499) Gross profit 154,809 131,912 596,082 882,803 27,331 (46,706) 863,428 Other income, by function 144,449 - - 144,449 - - 144,449 Distribution costs (57,046) (24,994) (166,582) (248,622) - 6,313 (242,309) Administration expenses (112,617) (40,389) (103,974) (256,980) (65,709) 28,264 (294,425) Other expenses, by function (24,413) (18,325) (161,546) (204,284) (749) 1,954 (203,079) Other income (expense) (38,880) (2,147) (2,470) (43,497) (16,181) 9,392 (50,286) Profit (loss) of operational activities 66,302 46,057 161,510 273,869 (55,308) (783) 217,778 Finance income 1,910 1,803 3,919 7,632 101,808 (99,170) 10,270 Finance costs (79,285) (6,643) (44,139) (130,067) (158,265) 87,421 (200,911) Share in profit (loss) of associates and joint ventures accounted for using 910 - (596) 314 9,329 (8,733) 910 the equity method Foreign currency translation differences (21,198) (3,412) (77,573) (102,183) 57,570 15,346 (29,267) Gain (loss) from indexation units 520 103 56,885 57,508 (2,488) (2,144) 52,876 Profit (loss), before taxes (30,841) 37,908 100,006 107,073 (47,354) (8,063) 51,656 Income tax expense (131,472) (12,833) 45,995 (98,310) 18,988 - (79,322) Profit (loss) (162,313) 25,075 146,001 8,763 (28,366) (8,063) (27,666) Profit (loss) from continuing operations (As Adjusted) (2) 105,182 48,204 163,980 317,366 (39,127) (10,175) 268,064 EBITDA (As Adjusted) determined by segment (3) 639,783 111,640 277,225 1,028,648 (37,930) (978) 989,740
(1) Corresponds to the operations of Empresas CMPC S.A. and Inversiones CMPC S.A. not included in the main segments. (2) Corresponds to profits (losses) before income tax expense, finance income and costs, foreign currency translation differences, income from indexation units, other profits (losses) and income of associates. (3) Corresponds to the Gross Profit plus Depreciation and amortization plus cost of formation of harvested plantations, plus higher cost of the exploited and sold part of the plantations derived from revaluation for their natural growth (see Note 13 Biological Assets), less distribution costs, less administrative expenses and less other expenses, by function.
58 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The Consolidated Statement of Comprehensive Income by business area as of December 31, 2019 is as follows:
Business areas (operating segments) ThUS$ Adjustments Total Concepts Pulp Biopackaging Softys Others (1) and Total CMPC segments eliminations Balance as of December 31, 2019 and for the year then ended Revenue from external customers 2,686,308 890,225 2,093,744 5,670,277 - - 5,670,277 Revenue between operating segments of the same entity 308,797 24,645 932 334,374 33,444 (367,818) - Revenue from external and related customers 2,995,105 914,870 2,094,676 6,004,651 33,444 (367,818) 5,670,277 Cost of sales (2,527,150) (817,613) (1,545,322) (4,890,085) - 327,637 (4,562,448) Gross profit 467,955 97,257 549,354 1,114,566 33,444 (40,181) 1,107,829 Other income, by function 118,155 - - 118,155 - - 118,155 Distribution costs (54,726) (24,805) (173,889) (253,420) - 5,689 (247,731) Administration expenses (132,460) (45,163) (107,736) (285,359) (75,070) 36,441 (323,988) Other expenses, by function (31,914) (13,420) (173,829) (219,163) (879) 675 (219,367) Other income (expense) (38,276) (2,739) (20,956) (61,971) (15,343) 7,030 (70,284) Profit (loss) of operational activities 328,734 11,130 72,944 412,808 (57,848) 9,654 364,614 Finance income 25,106 3,293 3,415 31,814 128,908 (140,019) 20,703 Finance costs (128,557) (8,204) (53,516) (190,277) (142,130) 137,057 (195,350) Share in profit (loss) of associates and joint ventures accounted for using (9) (773) 378 (404) 157,187 (156,792) (9) the equity method Foreign currency translation differences (9,741) (759) (63,610) (74,110) 65,329 (20) (8,801) Profit (loss) from indexation units 558 128 38,577 39,263 (3,106) 3,948 40,105 Profit (loss), before taxes 216,091 4,815 (1,812) 219,094 148,340 (146,172) 221,262 Income tax expense (121,622) (2,452) (19,142) (143,216) 6,345 - (136,871) Profit (loss) 94,469 2,363 (20,954) 75,878 154,685 (146,172) 84,391 Profit (loss) from continuing operations (As Adjusted) (2) 367,010 13,869 93,900 474,779 (42,505) 2,624 434,898 EBITDA (As Adjusted) determined by segment (3) 928,681 70,021 201,074 1,199,776 (26,769) (4,197) 1,168,810
(1) Corresponds to the operations of Empresas CMPC S.A. and Inversiones CMPC S.A. not included in the main segments. (2) Corresponds to profits (losses) before income tax expense, finance income and costs, foreign currency translation differences, income from indexation units, other profits (losses) and income of associates. (3) Corresponds to the Gross Profit plus Depreciation and amortization plus cost of formation of harvested plantations, plus higher cost of the exploited and sold part of the plantations derived from revaluation for their natural growth (see Note 13 Biological Assets), less distribution costs, less administration expenses and les s othe r expe ns es , by function.
59 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The general information on assets, liabilities, expenses by nature and cash flows as of December 31, 2020 and December 31, 2019 is as follows:
Business areas (operating segments) ThUS$ Adjustments Concepts Pulp Biopackaging Softys Total segments Others (1) and Total CMPC eliminations Balance as of December 31, 2020 and for the year then ended Assets 9,996,369 1,569,570 2,571,543 14,137,482 4,042,157 (3,452,686) 14,726,953 Investments accounted for using the equity method 1,471 - - 1,471 - - 1,471 Increases in non-current assets (2) 340,732 53,972 136,658 531,362 2,018 - 533,380 Liabilities 4,421,332 481,858 1,514,807 6,417,997 3,892,980 (3,450,161) 6,860,816 Raw material and supplies used (1,573,052) (637,147) (1,362,320) (3,572,519) - 245,956 (3,326,563) Employee benefits expenses (167,202) (94,443) (273,108) (534,753) (24,729) - (559,482) Depreciation and amortization expense (363,215) (63,436) (113,245) (539,896) (1,197) (9,197) (550,290) Other significant non-cash items (56,547) - - (56,547) - - (56,547) Impairment losses of assets recognized in profit or loss (3) (26,590) (1,520) (8,788) (36,898) - - (36,898) Reversal of impairment losses of assets recognized in profit or loss (3) 270 755 2,348 3,373 - - 3,373 Cash flows from operating activities 556,064 79,659 136,185 771,908 (10,599) (8,674) 752,635 Cash flows from investment activities (285,033) (106,107) (63,596) (454,736) 48,038 74,964 (331,734) Cash flows from financing activities (299,528) 31,439 (37,852) (305,941) 223,434 (66,290) (148,797) Business areas (operating segments) ThUS$ Adjustments Concepts Pulp Biopackaging Softys Total segments Others (1) and Total CMPC eliminations Balance as of December 31, 2019 and for the year then ended Assets 10,979,156 1,539,726 2,636,399 15,155,281 4,135,074 (4,334,559) 14,955,796 Investments accounted for using the equity method 502 - - 502 - - 502 Increases in non-current assets (2) 349,039 51,376 439,595 840,010 3,242 - 843,252 Liabilities 5,011,090 458,897 1,619,047 7,089,034 4,039,643 (4,308,456) 6,820,221 Raw material and supplies used (1,626,854) (708,616) (1,434,546) (3,770,016) - 321,767 (3,448,249) Employee benefits expenses (207,909) (92,384) (264,910) (565,203) (26,022) - (591,225) Depreciation and amortization expense (356,915) (56,152) (107,174) (520,241) (15,736) 6,821 (529,156) Other significant non-cash items (79,748) - - (79,748) - - (79,748) Impairment losses of assets recognized in profit or loss (3) (26,240) (1,456) (5,875) (33,571) - - (33,571) Reversal of impairment losses of assets recognized in profit or loss (3) 375 996 1,125 2,496 - - 2,496 Cash flows from operating activities 619,455 79,597 40,961 740,013 (81,726) 10,767 669,054 Cash flows from investment activities (302,951) (51,778) (408,324) (763,053) (15,026) 65,015 (713,064) Cash flows from financing activities (283,235) (26,659) 417,812 107,918 (333,269) (75,781) (301,132)
(1) Corresponds to the operations of Empresas CMPC S.A. e Inversiones CMPC S.A. not included in the main segments. (2) The increase in non-current assets does not include financial instruments, deferred tax assets or rights derived from insurance contracts. (3) Losses and reversal of impairment losses include the effects of provision in accounts receivable, Inventories, Biological Assets and Property, plant and equipment.
60 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Each segment is accounted for in accordance with the Company's general accounting policies.
Transactions between CMPC subsidiaries are accounted for at market prices and balances, transactions and profits or losses remain in the segment of origin and are only eliminated at the entity's consolidated financial statements.
CMPC’s policy of concentrating a large part of its financial operations in its subsidiary Inversiones CMPC S.A. results in outstanding balances in current accounts between subsidiaries, which are subject to market interest rates.
Administration Management services provided by Empresas CMPC S.A. are invoiced to each segment on the basis of time consumed and “drivers” identified in each of them.
In general, there are no special conditions or criteria for transactions between subsidiaries that might affect the results or valuation of the assets and liabilities of each segment.
Revenue from sales to CMPC's external customers, at the end of each period, were distributed across the following geographical areas:
Year Markets 2020 2019 ThUS$ ThUS$ Chile (Company's country of domicile) 1,001,415 1,076,108 China 631,739 706,042 Europa 496,588 634,904 Rest of Asia 494,603 625,067 Brazil 543,944 488,915 Mexico 450,487 449,443 Peru 403,448 424,641 United States and Canada 412,621 368,665 Argentina 358,133 357,871 Rest of Latin America 343,363 385,764 Others 150,586 152,857 Total 5,286,927 5,670,277
Revenue allocated to the different regions considers exports to those zones and local sales made by the subsidiaries domiciled in those geographic areas.
61 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Non-current assets, excluding financial instruments, deferred tax assets or rights derived from insurance contracts, by geographical area, are detailed as follows:
12/31/2020 12/31/2019 Geographic area description % ThUS$ % ThUS$ Chile (Company's country of domicile) 55.87% 6,145,080 55.51% 6,354,737 Brazil 34.86% 3,834,606 35.03% 4,010,182 Argentina 3.39% 372,841 3.46% 395,795 Peru 2.23% 245,147 2.43% 278,671 Mexico 2.63% 289,038 2.47% 282,357 Colombia 0.52% 57,122 0.55% 63,290 Uruguay 0.27% 30,109 0.31% 35,254 Ecuador 0.21% 22,989 0.22% 25,548 United States 0.02% 1,927 0.02% 2,047 Total 100.00% 10,998,859 100.00% 11,447,881
NOTE 8 – FINANCIAL ASSETS
Financial assets as of December 31, 2020 and 2019, classified according to the categories established in IFRS 9, are detailed as follows:
Classification Financial Financial Total Hedging a sse ts a t Type of financial assets a sse ts a t financial a sse ts amortized "FVTPL" a sse ts costs ThUS$ ThUS$ ThUS$ ThUS$ Balance as of December 31, 2020 Cash and cash equivalents - 2,937 888,094 891,031 Other current financial assets 5,567 - - 5,567 Other non-current financial assets 27,483 - 41,893 69,376 Total financial assets 33,050 2,937 929,987 965,974
Balance as of December 31, 2019 Cash and cash equivalents - 2,185 612,853 615,038 Other current financial assets 4,563 - - 4,563 Other non-current financial assets 14,278 - - 14,278 Total financial assets 18,841 2,185 612,853 633,879
62 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
8.1. Cash and cash equivalents
Cash and cash equivalents include cash on hand and bank checking accounts, time deposits and other financial investments with original maturity of 90 days or less. This item also includes investments as part of cash management such as repurchase and resale agreements whose maturities are in accordance with the above, as described in IAS 7 “Statement of Cash Flows”.
As of December 31, 2020 and 2019, cash and cash equivalents, classified by currency of origin are detailed as follows:
Chilean US dollar Euro Argentinean Uruguayan Peruvian Colombian Mexican Sterling BrazileanSw e dish Total Cash and cash equivalents pe so pe so pe so new sol pe so pe so pound real Krona ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Balance as of December 31, 2020 Cash 67 97 - 2 2 23 1 5 - 14 - 211 Cash in bank accounts 1,563 7,934 246 3,007 5,903 2,696 858 1,750 146 235 - 24,338 Time deposit at less than 90 days 3,079 611,147 3,240 - - 35,970 - 8,773 1,547 77,629 280 741,665 Money market securities 121,880 - - 1,577 - - 1,196 164 - - - 124,817 Total 126,589 619,178 3,486 4,586 5,905 38,689 2,055 10,692 1,693 77,878 280 891,031
Balance as of December 31, 2019 Cash 90 110 - 3 2 57 1 5 - 22 - 290 Cash in bank accounts 3,477 18,325 21 2,652 4,703 3,429 1,266 5,577 154 2,816 - 42,420 Time deposit at less than 90 days 123,447 (1) 291,650 461 - - 22,067 - 9,785 47 82,621 22 530,100 Money market securities 40,043 116 - 1,928 - - - 141 - - - 42,228 Total 167,057 310,201 482 4,583 4,705 25,553 1,267 15,508 201 85,459 22 615,038
(1) As of December 31, 2019, the Company has signed currency forwarding contracts to cover the financial risk due to changes in the exchange rate associated with time deposits in Chilean pesos in the amount of ThUS$120,561.
Cash and cash in banks are available resources and their carrying amount is equal to their fair value (ThUS$24,549 as of December 31, 2020 and ThUS$42,710 as of December 31, 2019).
63 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Term deposits recorded at amortized cost with a maturity less than 90 days are detailed as follows:
12/31/2020 12/31/2019 Entity Currency ThUS$ ThUS$ BNP Paribas New York - United States US$ 167,112 40,000 MUFG Bank, Ltd. - United States US$ 135,066 114,107 Banco Sumitomo Mitsui Banking Corporation US$ 95,089 - JP Morgan Chase Bank, N.A. - United States US$ 88,887 2,939 Banco Itaú Corpbanca - Chile US$ 50,016 - Citibank N.A. N.Y. - United States US$ 38,302 116,303 Goldman Sachs Bank - United States US$ 30,052 - Banco Itaú - Brazil BRL 25,560 12,594 Banco Santander - Brazil BRL 20,033 29,586 Banco de Crédito del Perú PEN 16,956 10,951 Banco Safra S.A. - Brazil BRL 13,938 19,665 Banco BBVA - Peru PEN 12,854 8,368 Caixa Econômica Federal - Brazil BRL 9,337 7,990 Banco Nacional de México, S.A. M XN 7,633 7,854 Banco do Brasil BRL 4,847 5,002 Banco de Crédito del Perú US$ 4,504 1,909 Banco Bradesco S.A. - Brazil BRL 3,802 3,043 Scotiabank - Peru PEN 3,732 682 Citibank N.A. N.Y. - England EUR 3,235 461 Banco de Chile CLP 3,079 3,045 Citibank - Peru PEN 2,428 2,066 Citibank N.A. N.Y. - England GBP 1,542 47 Banco Santander - Mexico US$ 1,099 - Banco Santander - Mexico M XN 1,091 - Bank of America, N.A. - United States US$ 1,000 - JP Morgan Chase Bank, N.A. - England SEK 280 22 JP Morgan Chase Bank, N.A. - Brazil BRL 81 982 Scotiabank Inverlat S.A. - Mexico M XN 49 1,931 Banco Banrisul - Brazil BRL 26 18 Banco de la Producción S.A. Produbanco - Ecuador US$ 20 32 JP Morgan Chase Bank, N.A. - England EUR 5 - JP Morgan Chase Bank, N.A. - England GBP 5 - Bank of America Merrill Lynch Banco Múltiplo S.A. - Brazil BRL 4 3,740 Banco MUFG Brasil S.A. BRL 1 1 Scotiabank - Chile CLP - 45,587 Banco BCI - Chile CLP - 44,865 Banco Itaú Corpbanca - Chile CLP - 29,950 Banco BCI - Chile US$ - 15,060 Banco BBVA - Peru US$ - 1,300 Total 741,665 530,100
Placements are undertaken in accordance with counterparty’s risk parameters authorized by the Board of CMPC. Potential counterparties meeting these risk criteria are subsequently selected on the basis of diversification and financial return criteria.
64 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Investments in mutual funds and money market securities of CMPC are as follows:
As of December 31, 2020 and December 31, 2019, the book value of time deposits and money market securities does not differ from their fair value and there are no restrictions over use of the cash.
Cash and cash equivalents presented in the consolidated statement of cash flows are detailed as follows:
12/31/2020 12/31/2019 Cla sse s of a sse ts ThUS$ ThUS$ Cash and cash equivalents 891,031 615,038 Cash and cash equivalents presented in the statement of cash 891,031 615,038 flows
65 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
8.2. Other current financial assets a) Hedge assets
These assets represent the results of hedge contracts the Company poses in order to adequately manage the exchange rate risk, commodity prices, obligations for different investment projects and floating rates of financial obligations of the Company.
- Balances as of December 31, 2020
Rights Obligations Fair value of Entities Nature of the risk hedged Currency Amount Currency Amount net assets Maturity ThUS$ ThUS$ ThUS$ Banco Santander - Mexico Bank obligations US$ 1,538 M XN 1,410 128 Semiannual Scotiabank Inverlat S.A. - Mexico Bank obligations US$ 2,863 M XN 2,722 141 Semiannual Subtotal bank obligations 269 Bank of America, N.A. - England Oil price US$ 6,220 US$ 5,518 702 Maturity BNP Paribas - France Oil price US$ 12,118 US$ 10,678 1,440 Maturity Goldman Sachs International - United Kingdom Oil price US$ 18,254 US$ 17,171 1,083 Maturity Macquarie Bank Ltd. - Australia Oil price US$ 2,579 US$ 2,246 333 Maturity Morgan Stanley & Co. International plc - England Oil price US$ 16,630 US$ 14,890 1,740 Maturity Subtotal oil price 5,298 Total other current financial assets 60,202 54,635 5,567
- Balances as of December 31, 2019
Rights Obligations Fair value of Entities Nature of the risk hedged Currency Amount Currency Amount net assets Maturity ThUS$ ThUS$ ThUS$ Banco BCI - Chile Term deposit exchange rate US$ 45,321 CLP 44,952 369 Maturity Banco Itaú Corpbanca - Chile Term deposit exchange rate US$ 30,212 CLP 30,008 204 Maturity Scotiabank - Chile Term deposit exchange rate US$ 30,156 CLP 29,974 182 Maturity Subtotal exchange rate 755 Bank of America, N.A. - England Cash flows from sale of lumber to Europe US$ 10,099 EUR 9,866 233 Maturity BNP Paribas - France Cash flows from sale of lumber to Europe US$ 2,034 EUR 1,985 49 Maturity BNP Paribas - France Cash flows from sale of lumber to Europe US$ 1,296 GBP 1,276 20 Maturity Scotiabank - Chile Cash flows from sale of lumber to Europe US$ 657 GBP 648 9 Maturity Subtotal cash flows from sales 311 Banco MUFG Brasil S.A. Bank obligations US$ 50,384 BRL 47,937 2,447 Quarterly Bank of America Merrill Lynch Banco Múltiplo S.A. - Brazil Bank obligations BRL 24,287 US$ 24,044 243 Monthly Subtotal bank obligations 2,690 BNP Paribas - France Oil price US$ 12,423 US$ 11,759 664 Maturity JP Morgan Chase Bank, N.A. - England Oil price US$ 13,319 US$ 13,176 143 Maturity Subtotal oil price 807 Total other current financial assets 220,188 215,625 4,563
66 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
8.3. Other non-current financial assets
The composition of Other non-current financial assets as of December 31, 2020 and 2019, is as follow:
12/31/2020 12/31/2019 Cla sse s of a sse ts ThUS$ ThUS$ Hedge assets 27,483 14,278 Time deposits in guarantee 41,893 - Total 69,376 14,278 a) Hedge assets
These assets represent the cumulative result of cross currency swap operations used to hedge different financial obligations and interest rate swap to set the floating debt interest rate.
- Balances as of December 31, 2020
Rights Obligations Fair value of Entities Nature of the risk hedged Currency Amount Currency Amount net assets Maturity ThUS$ ThUS$ ThUS$ Banco Santander - Mexico Bank obligations US$ 3,846 M XN 3,526 320 Semiannual Scotiabank Inverlat S.A. - Mexico Bank obligations US$ 7,158 M XN 6,805 353 Semiannual Banco BCI - Chile Public obligations UF 76,642 US$ 72,938 3,704 Semiannual Banco de Chile Public obligations UF 51,552 US$ 51,055 497 Semiannual Banco Santander - Chile Public obligations UF 89,764 US$ 75,903 13,861 Semiannual Goldman Sachs International - United Kingdom Public obligations UF 16,734 US$ 14,646 2,088 Semiannual Scotiabank - Chile Public obligations UF 44,825 US$ 38,165 6,660 Semiannual Subtotal bank and public obligations 27,483 Total other non-current financial assets 290,521 263,038 27,483
- Balances as of December 31, 2019
Rights Obligations Fair value of Entities Nature of the risk hedged Currency Amount Currency Amount net assets Maturity ThUS$ ThUS$ ThUS$ Banco Santander - Mexico Bank obligations US$ 6,923 M XN 6,664 259 Semiannual MUFG Bank, Ltd. - United States Bank obligations US$ 100,850 US$ 100,558 292 Semiannual Scotiabank - Chile Bank obligations US$ 8,688 US$ 8,628 60 Semiannual Banco Santander - Chile Public obligations UF 85,129 US$ 75,903 9,226 Semiannual Scotiabank - Chile Public obligations UF 42,606 US$ 38,165 4,441 Semiannual Subtotal bank and public obligations 14,278 Total other non-current financial assets 244,196 229,918 14,278
Hedges are documented and tested to measure their effectiveness.
Based on a comparison of critical terms, the hedges are highly effective since the amounts covered coincide with the proportion of sales and with the obligations with the public and banking. Hedging contracts coincide with the currency in which the sales and obligations are denominated and their termination date coincides with the date on which sales are expected to be received and the obligations paid, that is, between the first and fourth quarters of the year 2021 in the case of sales abroad, between January 2021 and September 2024 for bank obligations and until June 2029 in the case of obligations to the public.
For the cash flow hedges settled during the period ended December 31, 2020, a net loss of ThUS$36,151 (losses recorded in Cost of sales of ThUS$364, Distribution costs of ThUS$6,689 and Exchange differences of ThUS$24,232). During the period ended December 31, 2020, inefficiencies due to hedging instruments were not recognized in the respective results.
67 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
For the cash flow hedges settled during the period ended December 31, 2019, a net gain of ThUS$7,023 was transferred from the Reserve for cash flow hedges to results (gain recorded in Exchange differences for ThUS$8,474 and decreased for a loss recorded in Cost of sales for ThUS$1,451). In turn, the sum of ThUS$156 was transferred with payment to Properties, plant and equipment (Construction in progress), as a result of the settlement of hedging instruments associated with the repair of Caldera Recuperadora Guaíba 2 in Brazil and transferred with payment to Investments. The amount of ThUS$3,579 accounted for using the equity method. During the period ended December 31, 2019, inefficiencies for hedging instruments were not recognized in the respective results.
b) Term deposits in guarantee
Term deposits in guarantee are recorded at amortized cost and are detailed as follows:
12/31/2020 12/31/2019 Entity Moneda ThUS$ ThUS$ Banco Itaú - Brazil BRL 41,893 - Total 41,893 -
This instrument has a contractual rescue restriction, since they are part of the Escrow agreed by the subsidiary Melhoramentos CMPC Ltda.
8.4. Fair value hierarchy
The financial assets recorded at fair value in the statement of financial position, have been measured using the methodologies stated in IFRS 13. The following parameters have been considered for the purpose of applying criteria for determining the fair value of financial assets:
Level I: Values or prices quoted in active markets for identical assets and liabilities. Level II: Information from sources other than the values quoted in Level I, but observable in markets for the assets and liabilities whether directly (prices) or indirectly (derived from prices). Level III: Information for assets and liabilities that are not based on observable market data.
68 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The following table presents the financial and hedge assets that are measured at fair value as of December 31, 2020 and 2019:
Hierarchy used to determine fair value
Financial instruments measured at fair value Level I Level II Level III ThUS$ ThUS$ ThUS$ Balance as of December 31, 2020 Investment in mutual funds 2,937 - - Hedging assets - 33,050 - Total financial assets at fair value 2,937 33,050 -
Balance as of December 31, 2019 Investment in mutual funds 2,185 - - Hedging assets - 18,841 - Total financial assets at fair value 2,185 18,841 -
8.5. Committed line
In March 2017, the subsidiary Inversiones CMPC S.A. obtained a Revolving Credit Line with Banco Santander, Export Development Canada, Scotiabank & Trust (Cayman) Ltd. and The Bank of Tokyo-Mitsubishi UFJ, Ltd., acting as bookrunner. This credit line amounted to ThUS$400,000 with a maximum maturity of 3 years. In August 2018, this committed credit line was extended for two additional years (from September 13, 2020 to September 14, 2022) for a total amount of ThUS$200,000 with Banco Santander and Scotiabank & Trust (Cayman) Ltd.
In August 2020, the subsidiary Inversiones CMPC S.A. obtained a new Sustainable Committed Credit Facility for environmental purposes from MUFG Bank, Ltd., Sumitomo Mitsui Banking Corporation, Export Development Canada and BNP Paribas Securities Corp., the latter acting as bookrunner. This line amounts to ThUS$100,000 with a maximum term of two years from the date the loan was granted. The interest rate is adjusted annually according to four sustainability indicators, defined based on material environmental aspects for the Company.
As of December 31, 2020, both lines are fully available.
69 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 9 - OTHER NON-FINANCIAL ASSETS
Other current and non-current non-financial assets are detailed as follows:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Current: Current insurance 33,916 21,443 Recoverable taxes 112,805 92,686 Advance payments 3,527 3,355 Advances to suppliers 16,886 21,019 Others 1,948 1,770 Total 169,082 140,273
Non-current: Advance payment to Fibria Celulose S.A. for Predios Losango - Brazil (1) 118,393 118,393 Taxes in the recovery process related to sales and services 36,534 36,064 Guarantees receivable from Melpaper S.A. (Melhoramentos CMPC Ltda.) - 388 Advance payments for land leasing (Usufruct) 3,365 5,031 Advance payments for forests purchase 6,129 13,015 Advance payments for forest services 1,981 3,197 Advance payments to suppliers of lumber 283 559 Investments in other companies 1,118 1,075 Advance payments for water rights 371 - Guarantees given to third parties 3,577 2,842 Others 905 1,185 Total 172,656 181,749
(1) In March 2017, the asset purchase and sale agreement between the subsidiary CMPC Celulose Riograndense Ltda. and Fibria Celulose SA was signed. This agreement included the acquisition of standing forest (flights), transfers of land use rights and rights to certain lease contracts for forest properties.
The amount as of December 31, 2020 for ThUS$118,393 corresponds to the value assigned to the purchase of land, not yet materialized, pending the respective legal authorizations. This operation was formalized with the award of social rights of two companies and their accounting was carried out as an asset purchase following the criteria defined in IFRS.
It should be noted that the purchase-sale agreement considers that if the transaction does not materialize, the amounts originally paid by CMPC Celulose Riograndense Ltda. will be restituted by Fibria Celulose S.A
70 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 10 - TRADE AND OTHER ACCOUNTS RECEIVABLE
10.1. Trade and other accounts receivable, current and non-current
Details of current and non-current trade and other accounts receivable are as follow:
12/31/2020 12/31/2019 Concepts ThUS$ % ThUS$ % Domestic market customers 170,277 148,617 Less impairment provision (1,812) (2,713) Domestic market customers, net 168,465 19.8 145,904 16.4 Export customers 391,724 389,090 Less impairment provision (271) (3,042) Export customers, net 391,453 46.0 386,048 43.3 Foreing subsidiaries customer 255,573 279,139 Less impairment provision (2,994) (2,701) Foreing subsidiaries customer, net 252,579 29.7 276,438 31.0 Domestic and export market documents 655 0.1 4,403 0.5 Foreing subsidiaries documents 7,856 0.9 11,507 1.3 Current accounts with third parties 3,901 0.5 5,160 0.6 Insurance claims 1,981 0.2 8,582 1.0 Current accounts with employees 9,119 1.1 11,241 1.3 Export repayments 547 0.1 323 0.0 Others 3,353 0.5 3,164 0.3 Total comercial debtors and other current accounts receivable 839,909 98.8 852,770 95.7
Account receivable from Guaíba Municipality - Brazil - - 18,946 2.1 Account receivable from Receita Federal - Brazil 518 0.1 11,879 1.3 Guarantees receivable from Suzano Papel e Celulose S.A. - Brazil 5,949 0.7 4,284 0.5 Export repayments 1,185 0.1 1,416 0.2 Others 2,954 0.4 2,528 0.4 Total non-current accounts receivable 10,606 1.2 39,053 4.3 Total Portfolio, Net 850,515 100.0 891,823 100.0
71 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The aging of current and non-current trade and other accounts receivable is detailed as follows:
Net values Gross va lue s Aging 12/31/2020 12/31/2019 12/31/2020 12/31/2019 ThUS$ ThUS$ ThUS$ ThUS$ Current debtors 731,128 697,531 731,139 697,554 Up to 30 days overdue 82,471 124,626 82,477 124,661 From 31 to 60 days overdue 10,845 14,426 10,868 14,438 From 61 to 90 days overdue 4,379 8,514 4,389 8,523 From 91 to 120 days overdue 1,637 3,146 1,692 3,218 From 121 to 150 days overdue 3,216 881 3,319 1,006 From 151 to 180 days overdue 2,338 1,410 2,363 1,412 From 181 to 210 days overdue 992 400 1,123 435 From 211 to 250 days overdue 294 165 463 225 More than 250 days overdue (insurance claims or in 2,609 1,671 7,153 9,754 judicial process) Total net portfolio, current 839,909 852,770 844,986 861,226 Current debtors 10,606 39,053 10,606 39,053 Total net portfolio, non-current 10,606 39,053 10,606 39,053 Total portfolio, net 850,515 891,823 855,592 900,279
As of December 31, 2020 and December 31, 2019, there are no balances related to refinanced customers.
72 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The composition of current and non-current trade and other accounts receivable by type of currency is detailed as follows:
12/31/2020 12/31/2019 Currency ThUS$ ThUS$ United States dollar US$ 412,140 407,269 Chilean peso CLP 172,885 160,876 Mexican peso M XN 59,631 62,227 Brazilian real BRL 74,796 95,592 Argentinean peso ARS 51,903 51,768 Peruvian new sol PEN 30,152 37,359 Euro EUR 13,126 12,369 Colombian peso COP 9,939 10,568 Uruguayan peso UYU 8,596 8,984 Sterling pound GBP 6,145 5,563 Unidad de fomento (1) UF 596 195 Total current portfolio, net 839,909 852,770 Plus impairment provision 5,077 8,456 Total current portfolio, gross 844,986 861,226 Chilean peso CLP 117 124 Unidad de fomento (1) UF 255 150 United States dollar US$ 710 994 Argentinean peso ARS 1 59 Brazilian real BRL 9,523 37,726 Total non-current portfolio, net 10,606 39,053 Plus impairment provision - - Total non-current portfolio, gross 10,606 39,053
(1) Values held in UF corresponds to guarantees issued in Chile.
73 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The movement of impairment losses of trade debtors and other accounts receivable, current, is as follows:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Beginning balance 8,456 6,946 Increase by business combinations - 1,122 Impairment loss 3,825 2,744 Reversal of impairment loss (2,388) (1,540) Impairment used (4,233) (907) Increase (decrease) due to exchange differences (583) 91 Ending balance 5,077 8,456
During the period ended on December 31, 2020 an amount corresponding to ThUS$3,825 (ThUS$2,744 as of December 31, 2019) was recognized as an expense under administrative expenses in the statement of comprehensive income. Reversals of impairment losses are due to a change in the risk of non-recovery of certain customers. Normally, amounts charged to the bad debt reserve are written-off when there is no longer any expectation of recovering additional amounts.
There are no customers that individually represent more than 10% of consolidated annual sales.
10.2. Receivable Purchase Program
During the period, the Company signed portfolio sale contracts (RPP), transferring substantially all the risks and rewards of the invoices assigned to Banco Santander - Chile on a non-recourse basis. As of December 31, 2020, the amount of the assigned portfolio (RPP) amounts to ThUS$81,301 (ThUS$74,889 as of December 31, 2019). The dollar rate associated with the program is between Libor + 90 basis point and Libor + 115 basis point.
74 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 11 - ACCOUNTS RECEIVABLE FROM RELATED PARTIES
As of December 31, 2020 and 2019, current accounts receivable from related parties are detailed as follows:
Related Pending balance Terms of Explanation of the nature of Nature of relationship Country Accounts receivable party Related party name 12/31/2020 12/31/2019 Currency transactions the compensation established with related party of origin detail taxpayer No. ThUS$ ThUS$ with related to settle the transactions Curre nt a sse ts: 90.209.000-2 Compañía Industrial El Volcán S.A. Corporate group Chile Sale of products 706 338 CLP 30 days Monetary Common shareholders at 78.023.030-4 Sofruco Alimentos Ltda. Chile Sale of products 593 2 US$ 120 days Monetary the entity or its parent 80.397.900-6 Solcrom S.A. Corporate group Chile Sale of products 578 365 CLP 60 days Monetary 77.524.300-7 Fibrocementos Volcán Ltda. Corporate group Chile Sale of products 214 204 CLP 30 days Monetary 96.505.760-9 Colbún S.A. Corporate group Chile Sale of energy 133 13 CLP 30 days Monetary Common shareholders at 78.600.780-1 Viña la Rosa S.A. Chile Sale of products 27 - CLP 30 days Monetary the entity or its parent Common shareholders at Foreign Entel Perú S.A. Peru Sale of products 16 18 PEN 30 days Monetary the entity or its parent 76.138.547-K Megarchivos S.A. Controller / Director Chile Sale of products 15 20 CLP 30 dias Monetary Empresa Nacional de Common shareholders at 92.580.000-7 Chile Sale of products 14 55 CLP 30 dias Monetary Telecomunicaciones S.A. the entity or its parent 96.848.750-7 Aislantes Volcán S.A. Corporate group Chile Sale of products 11 - CLP 30 days Monetary Entity with special 75.764.900-4 Fundación CMPC Chile Sale of services 8 - CLP 30 days Monetary purpose Common shareholders at 96.806.980-2 Entel PCS Telecomunicaciones S.A. Chile Sale of products 6 54 CLP 30 dias Monetary the entity or its parent 97.080.000-K Banco BICE Corporate group Chile Sale of products 5 9 CLP 30 days Monetary Foreign CMPC Europe GmbH & Co. KG Joint venture Germany Sale of products 1 - EUR 90 days Monetary 96.656.410-5 BICE Vida Compañía de Seguros S.A. Corporate group Chile Sale of products - 7 CLP 30 days Monetary Foreign Soluciones Constructivas Volcán S.A.C. Corporate group Peru Sale of products - 6 US$ 30 days Monetary Total 2,327 1,091
75 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 12 - INVENTORY
As of December 31, 2020 and 2019, the breakdown of the inventory, net of obsolescence estimation, are detailed as follows:
12/31/2020 12/31/2019 Classes of inventory ThUS$ ThUS$ Finished products 476,223 543,393 Products in process 65,117 72,906 Raw materials 281,664 292,434 Materials and replacement parts 349,863 336,396 Agricultural and other products 38,901 35,012 Total 1,211,768 1,280,141
The cost of inventory recognized as cost of sales for the period ended December 31, 2020 amounts to ThUS$3,862,321 (ThUS$3,974,227 as of December 31, 2019).
The roll forward of the impairment for slow-moving inventory is detailed as follows:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Beginning balance 28,156 24,354 Increase by business combinations - 31 Obsolescence of the period 8,462 8,271 Obsolescence used (3,523) (3,141) Obsolescence reversal (985) (956) Increase (decrease) from exchange differences (133) (403) Ending balance 31,977 28,156
For the period ended December 31, 2020 the increase in the provision for obsolescence of inventories amounted to ThUS$8,462 (ThUS$8,271 as of December 31, 2019). Reversal of the impairment is originated by reuse, during the period, of inventory provisioned in prior years.
During period ended December 31, 2020 and December 31, 2019, no inventory has been pledged as guarantee.
The book value of inventory does not exceed the current sale prices, discounting the selling expenses (net realizable value).
76 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 13 – BIOLOGICAL ASSETS
As of December 31, 2020 and December 31, 2019, biological assets presented in the statement of financial position are detailed as follows:
12/31/2020 12/31/2019 ThUS$ ThUS$ Current biological assets 330,094 321,317 Non-current biological assets 3,041,699 3,041,258 Total 3,371,793 3,362,575
As of December 31, 2020 and December 31, 2019, movement of biological assets (increase, decrease and balances) are detailed as follows:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Current: Cost value Beginning balance as of January 1 127,497 123,607 Additions through acquisitions from third parties and new plantations 927 92 Sale of standing timber plantations and plants (2,338) (2,008) Transfer of plantations and lumber inventory (logs) (104,688) (125,325) Transfer of plantations from Biological non-current assets 106,539 131,131 Write-offs due to forestry fires (3,570) - Ending balance cost value 124,367 127,497 Fair value adjustment Beginning balance as of January 1 193,820 203,030 Transfer of plantations to lumber inventory (logs) (190,308) (202,775) Transfer of plantations from Biological non-current assets 203,072 196,504 Sale of standing timber plantations (857) (2,939) Final adjustment to fair value balance 205,727 193,820 Total biological assets, current 330,094 321,317
Non-current Cost value Beginning balance as of January 1 1,310,808 1,246,191 Additions through acquisitions from third parties and new plantations 185,284 199,339 Transfer of plantations to biological current assets (106,539) (131,131) Write-offs due to forestry fires (13,114) (3,591) Ending balance cost value 1,376,439 1,310,808 Fair value adjustment Beginning balance as of January 1 1,730,450 1,827,764 Profit on adjustment to fair value, less estimated costs at point of sale: Attributable to physical changes 244,685 196,583 Attributable to price changes (100,236) (78,428) Transfer of plantations to current biological assets (203,072) (196,504) Write-offs due to forestry fires (6,567) (18,965) Final adjustment to fair value balance 1,665,260 1,730,450 Total biological assets, non current 3,041,699 3,041,258
77 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Biological assets in Chile as of December 31, 2020 show an increase in growth compared to 2019, mainly due to updates in discount rate, short and long-term exchange rates, cost parameters and in physical variables.
For Brazil, a discount rate was updated, short and long-term exchange rates are maintained, harvest and transport costs were updated, and the surface base was adjusted, resulting in an increase in the value of biological assets compared to December 31, 2019.
In Argentina, the physical base, discount rate, long-term prices, road costs and establishment costs were updated, resulting in a decrease in its growth.
As of December 31, 2020, the effect of the natural growth of forest plantations, expressed in fair value (sales price minus estimated costs at the point of sale), is recognized according to the methodology described in Notes 2.7 and 4.1. The increase or decrease in fair value is recognized in the Consolidated Statement of Comprehensive Income; at line item "Other income, by function" concept. The amount reached ThUS$144,449 (ThUS$118.155 as of December 31, 2019). The higher cost of the harvested and sold assets derived from this revaluation is recognized in the line item "Cost of sales" and amounts reached to ThUS$200,996 (ThUS$197,903 as of December 31, 2019), together with the cost of formation of harvested plantations, which amounted reached ThUS$114,839 (ThUS$125,008 as of December 31, 2019).
13.1. General Information a) Forest heritage
CMPC's forestry heritage is equivalent to 719,000 hectares (654,000 hectares planted and 65,000 hectares to be planted), between Chile, Brazil and Argentina. The forest plantations (standing tree) are used as raw material in the manufacture of pulp, logs for the sawing and manufacture of boards.
New plantations for the period ended December 31, 2020 reached to 48,000 hectares (for the year ended December 31, 2019, 49,000 hectares), including the reforestation of harvested forests.
As of December 31, 2020, CMPC has usufruct, lease and shareholder agreements with third parties for an amount of ThUS$159,451 (ThUS$125,123 as of December 31, 2019), and comprising 106,000 hectares of forest plantations as December 31, 2020 (42,000 hectares as of December 31, 2019)
b) Cycle of forest plantations
Genetics and seeds: In order to optimize the growth and quality of forest plantations, CMPC uses different techniques of genetic improvement, without genetic modifications, which include the selection of superior individuals, crossings, evaluation and propagation of the best genotypes and processes embodied in a continuous improvement program.
Nurseries: The forest plantations originate mainly from seeds and vegetative propagation (stakes are extracted from a parent plant to plant and grow a new plant). The plants obtained from the process carried
78 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement out in the nursery are transferred to the final place where the forest will be established. There, through modern techniques developed by CMPC, the plantation is carried out.
Establishment: This operation is commonly carried out during the winter period, due to low temperatures, the seedlings are in a low activity condition (dormancy) and the soil has a high moisture content, helping the establishment. This process is supported by several soil preparation activities in order to improve the uptake of nutrients and moisture, as well as in advanced weed control and soil fertilization techniques, which facilitate the growth of trees.
Forest Management (Pruning and Thinning): Forest management refers to certain silvicultural interventions that modify final products, which thinning is common, and consists of the extraction of trees to improve the provision of soil resources and solar radiation to trees with better characteristics. In addition, the prunings deal with the partial elimination of the lower branches of the trees, which ensures the obtaining of wood free of knots, which is highly appreciated due to its better production quality and appearance.
Forest Protection: To avoid losses by external agents, the plantations are protected against pests, diseases and fires.
The methodology used to combat pests and diseases is integral management, which includes forestry techniques such as pruning and thinning, as well as the use of natural enemies of harmful agents. The use of chemicals is avoided.
In the case of rural fires, the strategy includes preventive work with neighbors, government agencies and companies in the sector, with special emphasis on the protection of rural urban contact points. Insurance policies remain in force on these assets.
Forest Harvest: Consists in the felling of adult trees by appropriate techniques and trained personnel, to get the lumber in the conditions required by the industry.
Radiata pine forests are harvested between 16 and 30 years for Chile (Argentina between 17 and 20 years), depending on the quality of the soil in which they are established, their management and the type of products to which they are destined. The forests of eucalyptus (globulus and nitens), mainly destined to cellulose pulp, are generally harvested between 10 and 25 years for Chile. In the case of Brazil, eucalyptus forests are harvested between 7 and 14 years.
Once the trees are harvested, the pieces are moved to collection fields from where, via truck, rail or barge, they are sent to different centers of wood consumption to be used as raw material.
After the trees are cut, in the following winter the same land is reforested, giving birth to a new forest. c) Biological risks
CMPC's forest plantations could be adversely affected by pests, diseases and other harmful agents. The Technology and Planning Management of Forestal Mininco SpA together with the SAG, INIA, CONAF and other forestry companies (through Consorcio Protección Fitosanitaria Forestal S.A.) develop programs for the prevention and control of forest pests by applying "Integrated Pest Management", which includes both
79 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement forestry and pruning techniques as well as the use of natural enemies of the harmful agents. The use of chemicals is avoided.
13.2. Forest plantations with restriction or pledged as guarantee
As of December 31, 2020 and December 31, 2019, the Company does not maintain forest plantations whose ownership has any restrictions or are pledged as guarantee.
13.3. Grants from government
As of December 31, 2020 and December 31, 2019, the Company did not receive government grants associated with biological assets.
13.4. Harvests
The total volume of logs harvested as of December 31, 2020 amounted to 17,447 Mm3 (18,744 Mm3 as of December 31, 2019)
13.5. Fair value hierarchy and sensitivity analysis
According to the fair value hierarchy described in IFRS 13, the valuation of the CMPC forest plantations are classified as Level III, due to the complexity of the model described in note 4.1. The main estimates (variables) used by the Management to calculate fair value of forest plantations are the following:
Discount rates: The methodology used considers differences between the discount rates used for each of the countries in which the Company owns forest plantations and is 6.8% to 14%.
Exchange rates: The exchange rate considered in the valuation of forest plantations is defined considering as a reference the average of the projections for the upcoming 2 years of the main investment banks that publish their estimates in Bloomberg.
Prices: The determination of prices used in the valuation of forest plantations considers weighted averages between short term, long term, points of sale, species, products and country, among others.
Costs: The costs considered in the model are the following: i) Establishment of new plantations, ii) Administration, iii) Harvest, iv) Transportation, and v) Construction of roads. All consider weighted averages between short term, long term, species and country, among others.
Below is the effect of the sensitive analysis in the valuation of forest plantations:
80 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
12/31/2020 12/31/2019 Increase 100 Decrease 100 Increase 100 Decrease 100 basis points basis points basis points basis points ThUS$ ThUS$ ThUS$ ThUS$ Lumber prices 72,908 (72,566) 72,216 (71,741) Direct costs (38,503) 38,681 (37,748) 37,908 Performance of forest plantations 38,656 (38,877) 38,422 (38,404) Discount rates (202,612) 233,568 (201,154) 233,072
81 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 14 - CURRENT AND NON-CURRENT TAX ASSETS AND LIABILITIES
The assets for current taxes as of December 31, 2020 and December 31, 2019, are detailed below:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Recoverable tax on profits absorbed by tax losses 28,292 53,215 Balance of monthly prepaid tax installments net of income tax 27,986 158,749 Income taxes recoverable from previous years 71,602 27,066 Total 127,880 239,030
The liabilities for current taxes as of December 31, 2020 and 2019, are detailed below:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Balance of income tax payable, net of first category credits 23,892 10,374 Balance of income tax payable of previous tax periods 17,788 14,430 Total 41,680 24,804
82 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The reconciliation of the balance of income tax with the expense to December 31, 2020 and December 31, 2019:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Recoverable credits during the period, net of income taxes 27,986 158,749 Tax loss benefit 22,049 47,286 Le ss: Income taxes payable for the period, net first category credits (23,892) (10,374) Balance of income taxes payable, net first category credits 26,143 195,661
Current tax recognized in profit (loss) (114,483) (100,187) Current tax recognized in other comprehensive income 478 221 Le ss: Recoverable credits for the period 140,148 295,627 Balance of income taxes payable, net first category credits 26,143 195,661
Current and not current tax assets as of December 31, 2020 and December 31, 2019, are detailed as follow:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Income taxes in recovery process 14,996 940 Total 14,996 940
83 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 15 - BUSINESS COMBINATIONS
15.1 Business combination in Mexico
On June 2, 2020, the Company, through its subsidiary Forsac México S.A. de C.V., acquired 100% of the participation of Samcarsa de México S.A. de C.V. The acquired company is an industrial company dedicated to converting paper bags to pack lime, construction materials, and other products, and has a plant located in Irapuato, with a production capacity of 60 million bags per year and a warehouse industrial plant of 5,760 m2, located on a land of 44,000 m2. Through this increase in production, it is expected to obtain the future economic benefits of this operation, which is in line with the Company's commercial strategy.
As a result of the above, CMPC has consolidated the new subsidiary in the Sack Kraft division of the Biopackaging operating segment, also recognizing a Goodwill for the highest value paid, as follows:
Group Reasonable Book value acquired value group acquired reasonable adjustment value ThUS$ ThUS$ ThUS$ Asse ts Current assets Cash and cash equivalents 907 - 907 Other current non financial assets 269 - 269 Comercial debtors and other current accounts receivable 765 - 765 Inventory 2,689 120 2,809 Total current assets 4,630 120 4,750 Non-current assets Otros non-financial assets 263 - 263 Intangible assets different from goodwill - 2,162 2,162 Property, plant and equipment 2,748 3,088 5,836 Total non-current assets 3,011 5,250 8,261 Total assets 7,641 5,370 13,011 Liabilities Current liabilities Trade and other accounts payable 1,837 - 1,837 Employee benefits current provisions 449 - 449 Total current liabilities 2,286 - 2,286 Non-current liabilities Deferred tax liabilities 19 1,611 1,630 Employee benefits non-current provisions 230 - 230 Total non-current liabilities 249 1,611 1,860 Total liabilities 2,535 1,611 4,146 Total identifiable net assets 5,106 3,759 8,865
ThUS$ Investment value 12,438 (-) Identifiable net assets 8,865 Goodwill 3,573
As of December 31, 2020, the acquiree has been absorbed by Forsac México S.A. de C.V. (see note 1). The purchase price was paid in cash and cash equivalents.
84 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
15.2 Business combination update in Brazil
During 2020, the Company updated the Purchase Price Allocation, which is an analysis to determine the valuation of the net assets identified in the acquisition through a business combination of Sepac- Serrados e Pasta e Celulose Ltda. As a result of this update, an increase in Intangible assets other than goodwill (Customer relationship) for ThUS$4,371, an increase in Deferred tax liabilities of ThUS$1,486 and a decrease in associated Goodwill for ThUS$2,885 have been recognized. Under IFRS 3, the Company has up to 12 months from the acquisition date to correct the value of the identified net assets, therefore the operation is under the guidelines of the IFRS standard, since the operation was completed on October 31, 2019.
NOTE 16 - INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
CMPC has investments in associated companies which line of business contemplates activities that are complementary to the industrial and commercial activities.
Consorcio Protección Fitosanitaria Forestal S.A. is a company formed by the main forestry companies in Chile, for pest control purposes.
Genómica Forestal S.A. is a company dedicated to research in Chile, which contributes to increasing the competitiveness in the forestry sector.
Consorcio Tecnológico Bioenercel S.A. is a company which line of business is the conversion of lignocelluloses biomass into biofuel.
The constitution of CMPC Europe GmbH & Co. KG. and CMPC Europe Management GmbH comprises the first step of CMPC's strategic alliance with the German Group GUSCO Handel G. Schürfeld + Co. GmbH. These companies created in a joint venture format are expected to become operational from 2020 and se ek to strengthen the Company's commercial networks in the sale of pulp, wood and cardboard in Europe.
In accordance with IAS 28, “Investments in Associates”, these investments are recorded using the equity method. The Company recognized its corresponding share of profits and losses in these companies, based on its share participation.
Commercial transactions with these companies or with their related companies are carried out at current local market prices, under fully competitive conditions, and when unrealized profits exist, they are eliminated.
85 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The share of CMPC in its associates is detailed as follows:
Associated entities Carrying Accrued Tax payer Country of Functional Interest Company's Income of amount of Name income No. origin currency equity the period the inversion % ThUS$ ThUS$ ThUS$ ThUS$ Balance as of December 31, 2020 96.657.900-5 Consorcio Protección Fitosanitaria Forestal S.A. Chile CLP 29.010 486 30 9 141 76.743.130-9 Genómica Forestal S.A. Chile CLP 25.283 31 - - 7 76.077.468-5 Consorcio Tecnológico Bioenercel S.A. Chile CLP 20.000 7 - - 1 Foreign CMPC Europe GmbH & Co. KG Germany EUR 55.000 2,376 1,519 903 1,307 Foreign CMPC Europe Management GmbH Germany EUR 55.000 27 (3) (2) 15 Total 2,927 1,546 910 1,471
Balance as of December 31, 2019 96.657.900-5 Consorcio Protección Fitosanitaria Forestal S.A. Chile CLP 29.010 429 (31) (9) 124 76.743.130-9 Genómica Forestal S.A. Chile CLP 25.283 (7) (3) - - 76.077.468-5 Consorcio Tecnológico Bioenercel S.A. Chile CLP 20.000 8 - - 2 Foreign CMPC Europe GmbH & Co. KG Germany EUR 55.000 657 - - 361 Foreign CMPC Europe Management GmbH Germany EUR 55.000 27 - - 15 Total 1,114 (34) (9) 502
The significant influence that the Company exercises over its associated companies is in accordance with what is established in IAS 28.
As of December 31, 2020 and December 31, 2019, assets and liabilities of associated companies are detailed as follows:
12/31/2020 12/31/2019 Assets and liabilities of associates and business groups Asse ts Liabilities Asse ts Liabilities ThUS$ ThUS$ ThUS$ ThUS$ Current 3,216 662 841 66 Non-current 416 43 380 41 Total 3,632 705 1,221 107
Revenue and ordinary expenses and results of the associated companies for the period are detailed as follows:
Year Revenue and expenses of associates and business groups 2020 2019 ThUS$ ThUS$ Revenue of ordinary activites 279,809 528 Other income statement items (278,263) (562) Profit (loss) 1,546 (34)
For the period ended as of December 31, 2020 and December 31, 2019, movements of investments accounted for using the equity method are detailed as follow:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Beginning balance as of January 1 502 149 Participation in period results 910 (9) Equity changes in associates and business groups 59 362 Final balance 1,471 502
86 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 17 - INTANGIBLE ASSETS OTHER THAN GOODWILL
The detail of balances and movements of the main classes of intangible assets other than goodwill as of and December 31, 2020 and December 31, 2019, are detailed as follow:
Electric line Water Emission Relationship easements and Software Trademarks Total Concepts easements entitlements with Clients others ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Beginning balance as of January 1, 2020 4,792 969 5,101 25,882 54,227 34,279 125,250 Additions 3,664 230 3,894 Acquisitions made through business - - - - - 6,533 6,533 combinations (see note 15) Amortization - - - (5,035) - (2,364) (7,399) Increases (decreases) due to other variations (1,641) 1,289 352 - - - - Variation from foreign currency translation 60 - - (1,019) (10,378) (9,007) (20,344) differences Ending balance as of December 31, 2020 3,211 2,258 5,453 23,492 43,849 29,671 107,934
Beginning balance as of January 1, 2019 4,755 1,036 5,097 20,747 731 - 32,366 Additions 47 - - 10,814 - - 10,861 Acquisitions made through business - - - 152 53,840 34,507 88,499 combinations Amortization - - - (4,481) - - (4,481) Increases (decreases) due to other variations - - 4 (997) (20) - (1,013) Variation from foreign currency translation (10) (67) - (353) (324) (228) (982) differences Ending balance as of December 31, 2019 4,792 969 5,101 25,882 54,227 34,279 125,250
Intangible assets other than capital gains with restriction or in Guarantee
There are no direct guarantees or restrictions on the ownership of intangible assets as of December 31, 2020.
NOTE 18 - GOODWILL
The balance of the goodwill acquired as of December 31, 2020 and December 31, 2019, is composed as follows:
Original 12/31/2020 12/31/2019 Investor Underlying asset currency ThUS$ ThUS$ Inversiones CMPC S.A. CMPC Pulp SpA, Pacífico plant US$ 51,081 51,081 Melhoramentos CMPC Ltda. Plantas Sao Paulo, Brazil BRL 22,965 29,561 CMPC Celulose Riograndense Ltda. Unidad Guaíba, Brazil US$ 8,460 8,460 Inversiones CMPC S.A. Forsac SpA, Chillán plant US$ 5,854 5,854 CMPC Papeles S.A. Envases Impresos SpA, Quilicura plant US$ 3,114 3,114 CMPC Papeles S.A. Chilena de Moldeados SpA, Puente Alto plant US$ 2,644 2,644 Inversiones Protisa SpA La Papelera del Plata S.A., Zárate, Naschel and Roca pla ARS 699 982 CMPC Tissue S.A. Grupo ABS Internacional S.A. de C.V., Mexico plants M XN 471 498 Inversiones CMPC S.A. CMPC Pulp SpA, Santa Fe 1 plant US$ 254 254 Subsidiarias Forestales - Chile C.A. y F. El Proboste Ltda., Fundos El Proboste US$ 221 221 Softys Arequipa S.A.C. Papelera Panamericana S.A., Arequipa plant PEN 1,136 1,241 Melhoramentos CMPC Ltda. Sepac - Serrados e Pasta e Celulose Ltda., Mallet plant BRL 110,846 146,603 Forsac México S.A. de C.V. Samcarsa de México S.A. de C.V., Irapuato plant US$ 3,573 - Total 211,318 250,513
The roll forward of Goodwill is detailed as follows:
87 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
12/31/2020 12/31/2019 Goodwill ThUS$ ThUS$ Beginning balance 250,513 104,459 Increase due to business combinations (see note 15) 688 148,824 Variation from foreign currency translation differences (39,883) (2,770) Ending balance 211,318 250,513
88 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 19 - PROPERTY, PLANT AND EQUIPMENT
As of December 31, 2020 and December 31, 2019, the net and gross values of property, plant and equipment are detailed as follows:
12/31/2020 12/31/2019 ThUS$ ThUS$ Net property, plant and equipment Construction in progress 247,478 352,892 Land 1,480,714 1,482,970 Buildings 1,724,446 1,746,708 Plant and equipment 3,698,469 3,903,572 Office equipments 5,936 4,333 Fixture and accessories 3,148 4,570 Transportation equipment 2,938 2,771 Lease property, plant and equipment - IAS 17 85,616 95,380 Other property, plant and equipment 41,778 44,605 Total net property, plant and equipment 7,290,523 7,637,801 Gross property, plant and equipment Construction in progress 247,478 352,892 Land 1,480,714 1,482,970 Buildings 2,762,423 2,687,300 Plant and equipment 7,193,846 7,055,158 Office equipments 15,279 12,999 Fixture and accessories 24,220 23,659 Transportation equipment 8,250 7,619 Lease property, plant and equipment - IAS 17 121,537 127,653 Other property, plant and equipment 141,375 140,770 Total gross property, plant and equipment 11,995,122 11,891,020
As of December 31, 2020 and December 31, 2019, the accumulated depreciation by type of property, plant and equipment is detailed as follows:
12/31/2020 12/31/2019 Accumulated depreciation ThUS$ ThUS$ Buildings 1,037,977 940,592 Plant and equipment 3,495,377 3,151,586 Office equipment 9,343 8,666 Fixtures and accesories 21,072 19,089 Transportation equipment 5,312 4,848 Leased property, plant and equipment - IAS 17 35,921 32,273 Other property, plant and equipment 99,597 96,165 Total accumulated depreciation 4,704,599 4,253,219
89 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The accounting movement of property, plant and equipment, net, as of December 31, 2020 and December 31, 2019, is as follows:
Property Other Office Fixtures & Transport Lease property, Construction Buildings, and property, Land equipment accesories equipment plant and Totals Concepts in progress net equipment plant and , net , net , net equipment, net , net equipment, ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Net movements in 2020 Beginning balance as of January 1, 2020 352,892 1,482,970 1,746,708 3,903,572 4,333 4,570 2,771 95,380 44,605 7,637,801 Acquisitions made through business combinations - 783 2,156 2,555 248 48 46 - - 5,836 Additions 186,390 7,387 19,310 61,927 135 1 61 35 5,941 281,187 Depreciation - - (104,334) (389,866) (990) (1,921) (685) (4,696) (10,937) (513,429) Impairment losses recognized in the period's result - - - (1,360) - - - - - (1,360) Increase (decrease) from transfer from constructions in progress (226,745) 731 68,990 148,941 2,518 542 916 - 4,107 - Increase (decrease) from transfer in foreign exchanges (61,720) (10,925) (8,217) (25,030) (307) (92) (169) (5,103) (1,935) (116,853) Increase (decrease) from other changes (3,339) (232) (167) (2,270) (1) - (2) - (3) (2,659) Ending balance as of December 31, 2020 247,478 1,480,714 1,724,446 3,698,469 5,936 3,148 2,938 85,616 41,778 7,290,523
Additional information from period 2020 Disbursment recognized during construction 60,782 7,387 15,910 51,802 111 1 51 - 5,010 141,054 Book value (gross) of fully depreciated goods in use - - 256,883 891,857 5,672 13,245 6,240 6,862 22,977 1,203,736
Net movements in 2019 Beginning balance as of January 1, 2019 366,831 1,466,766 1,777,934 3,938,631 4,752 4,966 1,955 84,797 48,823 7,695,455 Acquisitions made through business combinations 123 5,542 15,999 55,930 - 652 498 3,459 64,640 146,843 Additions 262,124 15,875 7,801 77,143 16 44 70 - 6,419 369,492 Depreciation - - (101,578) (372,813) (736) (1,642) (335) (4,911) (13,728) (495,743) Increase (decrease) from transfer from constructions in progress (227,127) 1,405 45,999 162,727 326 627 175 12,739 3,129 - Increase (decrease) from transfer in foreign exchanges (3,255) (996) (3,932) (11,505) (9) (76) (15) 1,033 (776) (19,531) Increase (decrease) from other changes (45,804) (5,622) 4,485 53,459 (16) (1) 423 (1,737) (63,902) (58,715) Ending balance as of December 31, 2019 352,892 1,482,970 1,746,708 3,903,572 4,333 4,570 2,771 95,380 44,605 7,637,801
Additional information from period 2019 Disbursment recognized during construction 117,590 15,875 6,543 64,948 13 35 58 - 5,398 210,460 Book value (gross) of fully depreciated goods in use - - 200,821 627,436 4,933 10,351 2,172 - 67,331 913,044
90 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The depreciation for the year ended December 31, 2020 and December 31, 2019, is as follows:
Year Period depreciation 2020 2019 ThUS$ ThUS$ Property, plant and equipment 513,429 495,743 Assets for right of use (see note 20.2) 26,405 29,252 Adjustment for stock variation (absorption cost) 3,057 (320) Total charged to income 542,891 524,675
Borrowing costs
During the year ended December 31, 2020, the Company capitalized borrowing costs by the amount of ThUS$380 (as of December, 2019 ThUS$864). The effective interest rate is 4.53% (4.09% as of December, 2019).
Dismantling and restoration costs
As of December, 2020 and December 31, 2019, the Company does not have a legal or contractual obligation associated with dismantling, withdrawing or rehabilitating sites where it operates, which is why its assets do not include costs associated with such requirements, except the subsidiary Productos Tissue del Ecuador S.A. by ThUS$239 provision recorded at its books in both periods (ThUS$580 as of December 31, 2019).
Impairment
During the year 2020, the Company recognized an impairment in property, plant and equipment of ThUS$1,360, which has been recorded in the Other gains (losses) in the Consolidated Statements of Comprehensive Income, and is associated with changes in the operational efficiency of plants and equipment, according to the impairment analysis performed by the Company as of December 31, 2020.
The Company's results in the period ended December 31, 2020 and December 31, 2019, have not been influenced by factors, internal or external, that could make it advisable to carry out impairment tests on the Company's assets. The aforementioned includes the evaluation of the effects of COVID-19, since the Company's plants have been classified as essential for all production chain. In general, there have been no significant decreases in the market value of its assets, the use of installed capacity has not been reduced and there have been no market losses of the entity's products or services (for quality, price, products substitutes, etc.). Market interest rates or other rates of return on investments have not increased significantly during the period, and such increases do not affect the discount rate used in the value-in-use calculations of assets, not affecting their recovery value.
91 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Property, plant and equipment with restriction or in Guarantee
There are no direct guarantees or restrictions on the ownership of Property, plant and equipment as of December 31, 2020.
NOTE 20 - LEASES
20.1. Financial Leases – IAS 17
All the Company's finance leases are for industrial assets classified as Property, Plant and Equipment in the Consolidated Statement of Financial Position. The net carrying amount as of and December 31, 2020 and December 31, 2019, are detailed follow:
12/31/2020 12/31/2019 Assets under financial lease, net ThUS$ ThUS$ Buildings and facilities 10,833 11,617 Plant and equipment 74,706 83,654 Transportation equipment 77 109 Total 85,616 95,380
20.2. Right of use assets – IFRS 16
The leases of property, plant and equipment, classified by class of asset, as of and December 31, 2020 and December 31, 2019, are detailed follow:
12/31/2020 12/31/2019 ThUS$ ThUS$ Right of use of the assets, Net Land 17,636 1,977 Buildings and facilities 54,994 77,539 Plant and equipment 56,399 64,625 Fixtures and accesories 2,581 3,501 Transportation equipment 16,046 23,173 Total right of use of the asset, net 147,656 170,815 Right of use of the assets, Gross Land 24,787 8,580 Buildings and facilities 81,309 117,153 Plant and equipment 109,774 108,953 Fixtures and accesories 6,474 6,463 Transportation equipment 31,763 41,271 Total right of use of the asset, gross 254,107 282,420
92 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The accumulated depreciation of leases of property, plant and equipment by class of asset, as of December 31, 2020 and December 31, 2019, is detailed as follows:
12/31/2020 12/31/2019 Accrued depreciation ThUS$ ThUS$ Land 7,151 6,603 Buildings and facilities 26,315 39,614 Plant and equipment 53,375 44,328 Fixtures and accesories 3,893 2,962 Transportation equipment 15,717 18,098 Total accrued depreciation of the right to use the asset (1) 106,451 111,605
(1) The calculation of the right to use related to IFRS 16 was made from the beginning of the contracts.
The accounting movement of the leases of property, plant and equipment as of December 31, 2020 and December 31, 2019, is as follows:
Buildings Property Fixtures & Transport and and Land accesories equipment Totals Concepts facilities, equipment , net , net net , net ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Net movements in 2020 Beginning balance as of January 1, 2020 1,977 77,539 64,625 3,501 23,173 170,815 Additions 16,468 19,038 10,873 440 2,900 49,719 Depreciation (809) (8,651) (12,454) (1,061) (3,430) (26,405) Increases (decreases) due to net exchange differences - (4,505) (2,167) (209) (731) (7,612) Increase (decrease) from other changes - (28,427) (4,478) (90) (5,866) (38,861) Balance as of December 31, 2020 17,636 54,994 56,399 2,581 16,046 147,656
Net movements in 2019 Initial balance adjustment IFRS 16 2,580 70,026 81,517 4,801 28,513 187,437 Additions - 23,955 3,850 95 226 28,126 Depreciation (603) (9,409) (13,390) (1,184) (4,666) (29,252) Increase (decrease) from net foreign exchanges differences - (756) (2,143) (63) (191) (3,153) Increase (decrease) from other changes - (6,277) (5,209) (148) (709) (12,343) Balance as of December 31, 2019 1,977 77,539 64,625 3,501 23,173 170,815
The classes of assets that the Company maintains under lease correspond to:
Right of use - Land
The Company has lease contracts for the usufruct of forest crops mainly in Brazil, which are executed for a period between 10 to 30 years, considering future renewals as long as these contracts contain the option to renew after the end of the original term.
Right of use – Buildings
The Company has lease contracts for buildings and warehouses to operate, this include offices and storage of merchandise. These contracts are normally executed for a period between 10 to 25 years, considering future renewals as long as these contracts contain the option to renew after the end of the original term.
93 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Right of use – Plant and equipment
The Company has lease contracts of machinery for the operation in the different businesses. These contracts are normally executed for a period between 5 to 10 years, considering future renewals as long as these contracts contain the option to renew after the end of the original term.
Right of use – Appliances and accessories
The Company has lease contracts for laptops which are used by people for the execution of different tasks. These contracts are normally executed for a period between 3 to 10 years, considering future renewals as long as these contracts contain the option to renew after the end of the original term.
Right of use – Vehicles
The Company has lease contracts for vehicles for the operation in the different businesses. These contracts are normally executed for a period between 5 to 10 years, considering future renewals as long as these contracts contain the option to renew after the end of the original term.
Although the estimated useful lives under IFRS 16 will always be based on the contract periods and their future renewals, there may be contracts that are outside the aforementioned terms due to the strategic consideration of the type of asset or changes in the trading requirements of contracts.
CMPC included extension options in new leases to provide operational flexibility. The extended extension options are exercisable only by the Company and at the beginning of the contract; it is evaluated whether it is likely and reasonably to exercise the renewal options. Empresas CMPC reevaluates whether it is likely and reasonably to exercise the options if there is a significant event or a significant change in the circumstances within its control.
Some lease contracts provide additional rental payments that are based on changes in the local price indexes that CMPC performs on the leased asset.
During the period of twelve months ended December 31, 2020, CMPC recognized ThUS$26,405 for depreciation expense (ThUS$29,252 as of December 31, 2019) and ThUS$15,661 for financial costs (ThUS$16,867 as of December 31, 2019), on these leases.
94 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
20.3. Liabilities for operating leases
Under this concept, obligations derived from commercial contracts of operating leases with third parties are registered, which were signed within the normal course of business.
The payments made by CMPC during the twelve months of 2020 in relation to the operating lease agreements according to IFRS 16 amount to ThUS$42,066 (ThUS$46,119 as of December 31, 2019)
Empresas CMPC expects the relative proportions of fixed and variable lease payments to remain generally consistent in future years.
The structure of the liability related to the operating lease contracts as of December 31, 2020 and 2019, are detailed as follow:
12/31/2020 12/31/2019 Concept ThUS$ ThUS$ Liabilities for current operating leases 21,700 22,949 Total Liabilities for current operating leases 21,700 22,949 Liabilities for non-current operating leases 141,574 168,762 Total Liabilities for non-current operating leases 141,574 168,762 Total Liabilities for operating leases 163,274 191,711
The analysis of the settlement of the liabilities for current and non-current operating leases recorded as of December 31, 2020 and December 31, 2019, expressed in their final amounts at the respective payment dates is as follows:
Maturity of Liabilities due for Operating Lease (1) More than 1 More than 3 91 days up to More than 5 Up to 90 days year up to 3 years up to 5 Total 1 year years years years ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Balance as of December 31, 2020 Liabilities for operating leases 10,192 29,535 75,194 63,949 69,679 248,549 Total 10,192 29,535 75,194 63,949 69,679 248,549 Balance as of December 31, 2019 Liabilities for operating leases 10,647 31,939 79,883 66,003 96,370 284,842 Total 10,647 31,939 79,883 66,003 96,370 284,842
(1) Values include interest payable in future lease terms.
95 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 21 - DEFERRED TAXES
Deferred taxes correspond to the amount of income tax the Company will have to pay (liabilities) or recover (assets) in future years, relating to temporary differences between the tax basis and the carrying amount of certain assets and liabilities. The main deferred tax asset corresponds to the entitlement of companies to use tax losses accumulated as of December 31, 2020, that can be used in the future. The main deferred tax liabilities payable in future years correspond to temporary differences arising from the revaluation of biological assets (forest plantations) and the revaluation of property, plant and equipment as of the date of transition to IFRS and to the application of accelerated depreciation for tax purposes.
It should be noted that the book and tax values from prior years will be used significantly in future years and arise, as previously indicated, from revaluations of non-current assets.
As of December 31, 2020 and December 31, 2019, deferred tax amounts are as follows:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Tax losses 193,214 143,701 Foreign currency translation differences (1) 132,934 113,716 Provisions (2) 84,333 59,003 Hedging liabilities 21,474 16,943 Other liabilities 6,201 6,823 Leases (Right of use) 4,591 7,229 Property, plant and equipment (1,230,052) (1,157,645) Biological assets (641,965) (625,045) Other assets (55,849) (77,816) Inventory (19,700) (23,537) Income accrued from foreign operations (8,392) (22,370) Deferred tax net balance (1,513,211) (1,558,998)
(1) Effect caused by the difference between the financial functional currency (dollar) and the tax currency (local currency) of the respective business unit, see note 3.1.b. (2) It includes ThUS$29,037 associated with deferred tax assets for investments abroad, the effect of which on profit for the period amounts to ThUS$444
The presentation of the Deferred Tax Assets and Liabilities in the Consolidated Statement of Financial Position as of December 31, 2020 and December 31, 2019, is as follows:
12/31/2020 12/31/2019 ThUS$ ThUS$ Deferred tax assets 81,060 39,414 Deferred tax liabilities (1,594,271) (1,598,412) Deferred tax net balance (1,513,211) (1,558,998)
96 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
As of December 31, 2020, deferred tax assets arising from tax losses amount to ThUS$193,214. These can be used to offset future taxable profits that may be generated in companies generating these balances, according to the following detail:
Variation with Variation w/o Deferred tax on tax loss effect on effect on income credit income Subsidiaries Country 12/31/2020 12/31/2019 12/31/2020 12/31/2020 ThUS$ ThUS$ ThUS$ ThUS$ Melhoramentos CMPC Ltda. Brazil 44,446 55,796 1,109 (12,459) CMPC Maderas SpA Chile 15,365 22,852 (7,487) - Drypers Andina S.A. Colombia 8,234 8,625 (1) (390) Envases Impresos SpA Chile 8,644 7,396 1,248 - Forestal Mininco SpA Chile 28,762 18,586 10,176 - Protisa Colombia S.A. Colombia 4,810 5,038 - (228) Grupo ABS Internacional S.A. de C.V. Mexico 782 980 (230) 32 CMPC Tissue S.A. Chile 34,588 - 34,588 - Inversiones Protisa SpA Chile 7,207 - 7,207 - Empresas CMPC S.A. Chile 1,066 - 1,066 - Forsac México S.A. de C.V. Mexico 2,968 2,601 367 - Inmobiliaria y Constructora San Roque SpA Chile 2,617 1,451 1,166 - Inversiones CMPC S.A. Chile 1,336 - 1,336 - Bioenergías Forestales SpA Chile 1,687 2,763 (1,076) - CMPC Inversiones de Argentina S.A. Argentina 10 11 2 (3) Forestal Timbauva S.A. Argentina 12 12 - - Sociedad Recuperadora de Papel SpA Chile 692 92 600 - Industria Papelera Uruguaya S.A. Uruguay - (1) (4) 5 CMPC Maderas México S.A. de C.V. Mexico 103 - 103 - Inmobiliaria Pinares SpA Chile 40 - 40 - CMPC Celulosa S.A. Chile 548 - 548 - CMPC Papeles S.A. Chile 4,529 2,555 1,974 - Fabi Bolsas Industriales S.A. Argentina - 44 (44) - Forestal Bosques del Plata S.A. Argentina 3,950 1,187 2,763 - Naschel S.A. Argentina 3 4 - (1) La Papelera del Plata S.A. Argentina 20,815 13,366 13,163 (5,714) Papeles Cordillera SpA Chile - 7 (7) - Forsac SpA Chile - 336 (336) - Total 193,214 143,701 68,271 (18,758)
Tax losses that can be charged against future earnings generated by companies in Chile and Brazil do not have expiration dates. However, the tax losses of companies in Mexico expire in 10 years, and for companies in Argentina and Ecuador tax losses expire in 5 years, and for the subsidiaries in Colombia, the tax losses generated as of 2017 expire within 12 years, maintaining the tax losses prior to 2016 their status as imprescriptible. Based on the normal course of business and projections, management estimates that almost all the tax losses will be used in future years.
97 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Deferred tax movements as December 31, 2020 and December 31, 2019, are detailed as follows:
12/31/2020 12/31/2019 Change in deferred taxes ThUS$ ThUS$ Deferred taxes, balance as of January 1 (1,558,998) (1,477,117) Tax losses 49,513 (37,878) Foreign currency translation differences 19,218 (15,679) Provisions 25,330 (14,363) Hedging liabilities 4,531 (1,091) Other liabilities (622) 4,398 Leases (Right of use) (2,638) 7,229 Property, plant and equipment (72,407) (5,480) Biological assets (16,920) 21,879 Other assets 21,967 (22,613) Inventory 3,837 1,875 Income accrued from foreign operations 13,978 (20,158) Ending balance (1,513,211) (1,558,998)
Temporary differences that generated deferred taxes as of December 31, 2020 their effect on the income statement are detailed as follows:
Deferred taxes recognized with effect on Deferred taxes recognized w/o income statement effect on income statement (*) Increase Increase Deferred Increase Increase Type of temporary difference (decrease) (decrease) taxes profit (decrease) (decrease) a sse ts liabilities (loss) a sse ts liabilities ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Tax losses 68,271 - 68,271 (18,758) - Foreign currency translation differences 19,218 - 19,218 - - Provisions 21,269 - 21,269 4,061 - Hedging liabilities 3,144 - 3,144 1,387 - Other liabilities (4,400) - (4,400) 3,778 - Leases (Right of use) - (3,245) (3,245) - 607 Property, plant and equipment - (87,492) (87,492) - 15,085 Biological assets - (16,920) (16,920) - - Other assets - 19,830 19,830 - 2,137 Inventory - 3,591 3,591 - 246 Income accrued from foreign operations - 14,078 14,078 - (100) Total 107,502 (70,158) 37,344 (9,532) 17,975
(*) The decrease in deferred tax liability recorded, with no effect on profit or loss, of ThUS$8,443 (decrease in deferred tax assets of ThUS$9,532 and decrease in deferred tax liabilities of ThUS$17,975) was mainly due to tax losses, provisions, other liabilities and property, plant and equipment. In addition, an effect of foreign currency exchange difference is recognized when transferring balances expressed in functional currencies other than the US dollar.
98 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Temporary differences generated by deferred taxes as of December 31, 2019, and their effect on income are detailed as follows: Deferred taxes recognized with effect on Deferred taxes recognized w/o income statement effect on income statement (*) Increase Increase Deferred Increase Increase Type of temporary difference (decrease) (decrease) taxes profit (decrease) (decrease) a sse ts liabilities (loss) a sse ts liabilities ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Tax losses (32,833) - (32,833) (5,045) - Foreign currency translation differences (15,679) - (15,679) - - Provisions (11,905) - (11,905) (2,458) - Hedging liabilities (3,135) - (3,135) 2,044 - Other liabilities 4,506 - 4,506 (108) - Leases (Right of use) - (288) (288) - 7,517 Property, plant and equipment - 26,889 26,889 - (32,369) Biological assets - 19,880 19,880 - 1,999 Other assets - 7,095 7,095 - (29,708) Inventory - 1,820 1,820 - 55 Income accrued from foreign operations - (20,235) (20,235) - 77 Total (59,046) 35,161 (23,885) (5,567) (52,429)
(*)The decrease in deferred tax asset recorded, without an effect on income, for ThUS$57,996 (decrease in deferred tax assets of ThUS$5,567 and increase in deferred tax liabilities of ThUS$52,429) corresponds to the following: tax losses, leases, property, plant and equipment and other assets. In addition, an exchange difference effect is recognized when transferring balances expressed in functional currencies other than dollar.
NOTE 22 - OTHER FINANCIAL LIABILITIES
As of December 31, 2020 and December 31, 2019, other financial liabilities are detailed as follows:
12/31/2020 12/31/2019 Concepts ThUS$ ThUS$ Interest bearing loans - current 252,774 507,480 Hedging liabilities - current 10,116 5,367 Subtotal other current financial liabilities 262,890 512,847 Interest bearing loans - non-current 3,747,945 3,366,783 Hedging liabilities - non-current 33,014 65,414 Subtotal other non-current financial liabilities 3,780,959 3,432,197 Total 4,043,849 3,945,044
Hedging liabilities are presented net of collateral postings amounting to ThUS$53,319 as of December 31, 2020 (ThUS$36,852 as of December 31, 2019).
99 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
22.1. Composition of the balance and maturities a) Current and non-current interest bearing loans
Interest bearing loans grouped by maturity dates are detailed as follows:
- Balances as of December 31, 2020
Interest bearing loans (ThUS$) More than Debtor More than 3 More than More than More than More than 4 Obligation Up to 1 1 month More than 5 Effective Nominal company Debtor company name Currency Creditor's name months up 1 year up 2 years up 3 years up years up to 5 Total Amortization nominal month up to 3 years rate rate taspayer No. to 1 year to 2 years to 3 years to 4 years years value months Bank obligations (continued): Banco Santander - Spain (Agencia Swedish 96.596.540-8 Inversiones CMPC S.A. US$ - - 2,573 2,563 831 - - - 5,967 Semiannual 2.24% 6,409 Libor+0.80% * Export Credit Corporation) - Sweden (**) Banco Santander - Spain (Agencia Swedish 96.596.540-8 Inversiones CMPC S.A. US$ - - 4,342 4,123 4,123 4,123 4,123 8,493 29,327 Semiannual 3.70% 29,107 3.70% * Export Credit Corporation) - Sweden MUFG Bank, Ltd. (Administrative Agent) - 96.596.540-8 Inversiones CMPC S.A. US$ - - 361 - - 98,751 - - 99,112 Maturity 3.12% 100,000 Libor+1.05% * Japan (**) Nordea Bank AB (publ) (Agencia Swedish Foreign Absormex CMPC Tissue S.A. de C.V. US$ 2,356 - 2,201 4,402 4,402 1,500 - - 14,861 Semiannual 2.37% 15,406 2.37% * Export Credit Corporation) - Sweden (**) Foreign Productos Tissue del Perú S.A. PEN Banco de Crédito del Peru 6 ------6 Maturity 4.85% 6 4.85% Foreign Productos Tissue del Perú S.A. PEN Banco BBVA - Peru 19 ------19 Maturity 10.40% 19 10.40% Foreign La Papelera del Plata S.A. ARS JP Morgan Chase Bank, N.A. - England 7,119 ------7,119 Maturity 37.50% 7,119 37.50% Foreign La Papelera del Plata S.A. ARS BBVA Banco Francés S.A. - Argentina 728 ------728 Maturity 37.00% 728 37.00% Foreign La Papelera del Plata S.A. ARS Banco Santander - Argentina 2,962 ------2,962 Maturity 35.00% 2,962 35.00% Foreign La Papelera del Plata S.A. ARS Banco HSBC Bank Ltd. - Argentina 8,278 ------8,278 Maturity 38.00% 8,278 38.00% Foreign La Papelera del Plata S.A. ARS Banco Patagonia S.A. - Argentina 8,281 ------8,281 Maturity 34.75% 8,281 34.75% Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 28 54 244 108 - - - - 434 Monthly 6.40% 433 ECM+2.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 29 55 249 55 - - - - 388 Monthly 7.22% 387 TJLP+2.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 17 33 149 33 - - - - 232 Monthly 8.22% 232 TJLP+3.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 10 76 341 455 38 - - - 920 Monthly 6.54% 910 ECM+2.42% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 44 83 373 497 - - - - 997 Monthly 7.36% 993 TJLP+2.42% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 29 50 224 297 - - - - 600 Monthly 8.36% 597 TJLP+3.42% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 1,321 2,496 11,233 14,673 1,223 - - - 30,946 Monthly 7.08% 31,808 ECM+2.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil (**) 1,720 3,207 14,437 18,658 - - - - 38,022 Monthly 7.08% 39,449 TJLP+2.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil (**) 1,042 1,924 8,660 11,197 - - - - 22,823 Monthly 7.08% 23,668 TJLP+3.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil (**) 1,110 2,161 9,725 12,383 - - - - 25,379 Monthly 7.08% 26,896 2.50% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil (**) 214 401 1,806 2,364 - - - - 4,785 Monthly 7.08% 4,891 TJLP+1.88% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 22 42 188 248 - - - - 500 Monthly 7.08% 504 TJLP * Banco Santander - Spain and Nordea Bank AB Foreign CMPC Celulose Riograndense Ltda. US$ (publ) (Agencia Swedish Export Credit 6,238 - 5,637 11,886 11,886 11,886 11,886 8 59,427 Semiannual 4.07% 59,710 2.35% * Corporation) - Sweden Banco Santander - Spain and Nordea Bank AB Foreign CMPC Celulose Riograndense Ltda. US$ (publ) (Agency Finnish Export Credit Ltd.) - - - 20,858 21,898 21,898 21,898 21,898 - 108,450 Semiannual 3.62% 110,000 2.41% * Finland Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 20 40 179 239 39 - - - 517 Monthly 3.00% 511 3.00% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 2 4 18 24 12 - - - 60 Monthly 3.00% 60 3.00% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 11 22 97 130 97 - - - 357 Monthly 3.50% 352 3.50% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 22 37 167 223 223 223 - - 895 Monthly 6.00% 873 6.00% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 52 104 ------156 Monthly 10.18% 152 4.6%+TJLP * Foreign Melhoramentos CMPC Ltda. BRL BNP Paribas S.A. - United States 606 - 37,018 - - - - - 37,624 Maturity 3.53% 37,018 3.53% Foreign Melhoramentos CMPC Ltda. BRL Banco Santander - Brazil - - 3,194 - - - - - 3,194 Maturity 3.33% 3,175 1.43%+CDI
100 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(Continued)
Interest bearing loans (ThUS$) More than Debtor More than 3 More than More than More than More than 4 Obligation Up to 1 1 month More than 5 Effective Nominal company Debtor company name Currency Creditor's name months up 1 year up 2 years up 3 years up years up to 5 Total Amortization nominal month up to 3 years rate rate taspayer No. to 1 year to 2 years to 3 years to 4 years years value months Bank obligations (continued): Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco do Brasil 166 332 1,495 1,986 159 - - - 4,138 Monthly 2.50% 4,138 2.50% Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco do Brasil 1 3 12 16 7 - - - 39 Monthly 3.00% 39 3.00% Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco do Brasil 22 45 202 269 263 - - - 801 Monthly 3.50% 801 3.50% Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco do Brasil 47 94 422 562 562 402 - - 2,089 Monthly 6.00% 2,089 6.00% Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco Bradesco S.A. - Brazil 10 20 90 120 120 120 - - 480 Monthly 6.00% 480 6.00% Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco Santander - Brazil 64 128 577 770 770 770 128 - 3,207 Monthly 6.69% 3,207 6.69% Total bank obligations 42,596 11,411 127,072 110,179 46,653 139,673 38,035 8,501 524,120 Bonds payable: 96.596.540-8 Inversiones CMPC S.A. US$ Bono - Rule 144A - 6,927 - - - 497,513 - - 504,440 Maturity 4.79% 500,000 4.75% 96.596.540-8 Inversiones CMPC S.A. US$ Bono - Rule 144A - - 5,226 - - - - 494,136 499,362 Maturity 4.42% 500,000 4.38% 96.596.540-8 Inversiones CMPC S.A. US$ Bono - Rule 144A 8,930 ------492,991 501,921 Maturity 3.87% 500,000 3.85% 96.596.540-8 Inversiones CMPC S.A. US$ Bono - Rule 144A - - 4,063 498,875 - - - - 502,938 Maturity 4.64% 500,000 4.50% 96.596.540-8 Inversiones CMPC S.A. US$ Bono - Rule 144A - - 2,734 - 498,446 - - - 501,180 Maturity 4.47% 500,000 4.38% 96.596.540-8 Inversiones CMPC S.A. UF Bono - Serie F, Reg. 570 CMF (**) - 3,281 - - - - - 281,806 285,087 Maturity 4.55% 286,226 4.30% 96.596.540-8 Inversiones CMPC S.A. UF Bono - Serie G, Reg. 733 CMF (**) - - 1,360 - - - - 199,538 200,898 Maturity 3.70% 204,447 3.50% 96.596.540-8 Inversiones CMPC S.A. UF Bono - Serie H, Reg. 570 CMF (**) - - 24,485 - - - 71,883 - 96,368 Maturity 1.77% 98,135 1.50% 96.596.540-8 Inversiones CMPC S.A. UF Bono - Serie M, Reg. 733 CMF (**) ------198,446 198,446 Maturity 2.55% 204,447 2.20% 96.596.540-8 Inversiones CMPC S.A. UF Bono - Serie O, Reg. 928 CMF (**) - - 139 - - - - 105,308 105,447 Maturity 1.69% 102,224 1.69% Foreign Productos Tissue del Perú S.A. PEN Bono - Serie A 340 - - - 13,797 13,420 - - 27,557 Maturity 6.625% 27,594 6.625% Total bonds payable 9,270 10,208 38,007 498,875 512,243 510,933 71,883 1,772,225 3,423,644 Finance lease obligations: Foreign Protisa Colombia S.A. COP BBVA Colombia S.A. 1 1 4 - - - - - 6 Monthly 0.93% 6 0.93% Foreign Drypers Andina S.A. COP BBVA Colombia S.A. - 1 4 2 - - - - 7 Monthly 0.97% 7 0.97% Foreign Forsac Perú S.A. US$ BBVA Banco Continental S.A. - Peru 206 413 1,899 1,962 - - - - 4,480 Monthly 4.40% 4,480 4.40% Foreign Papelera Panamericana S.A. PEN Banco de Crédito del Perú 6 10 48 46 1 - - - 111 Monthly 8.00% 111 8.00% Foreign Papelera Panamericana S.A. PEN BBVA Banco Continental S.A. - Peru 29 - 16 42 44 47 51 59 288 Monthly 7.00% 288 7.00% Foreign Papelera Panamericana S.A. PEN Banco Interamericano de Finanzas - Peru 4 7 58 82 88 94 100 342 775 Monthly 7.70% 775 7.70% Foreign Productos Tissue del Perú S.A. PEN Scotiabank - Peru - 64 199 - - - - - 263 Quarterly 7.45% 263 7.45% Foreign Productos Tissue del Perú S.A. PEN Scotiabank - Peru - 305 947 661 - - - - 1,913 Quarterly 7.55% 1,913 7.55% Foreign Productos Tissue del Perú S.A. PEN Scotiabank - Peru - 1,765 5,506 7,860 - - - - 15,131 Quarterly 8.10% 15,131 8.10% Foreign Productos Tissue del Perú S.A. PEN Scotiabank - Peru 237 - 740 1,055 847 - - - 2,879 Quarterly 8.15% 2,879 8.15% 91.440.000-7 Forestal Mininco SpA CLP Sodexo Chile S.A. - RUT 94.623.000-6 5 10 50 63 70 - - - 198 Monthly 10.00% 199 10.00% Total finance lease obligations: 488 2,576 9,471 11,773 1,050 141 151 401 26,051 Other obligations: Comercial e Industrial ERCO (Chile) Ltda. - 96.532.330-9 CMPC Pulp SpA US$ 140 280 1,255 1,685 1,696 1,707 1,718 18,423 26,904 Monthly 7.80% 26,903 7.80% RUT 76.163.730-4 Total other obligations: 140 280 1,255 1,685 1,696 1,707 1,718 18,423 26,904 Total interest bearing loans 52,494 24,475 175,805 622,512 561,642 652,454 111,787 1,799,550 4,000,719 Total interest bearing loans at fair value 52,494 24,475 175,805 622,512 561,642 652,454 111,787 1,799,550 4,000,719 (*) Loans contracted with maturities of more than one year (**) Risks managed totally or partially through contracts rate swap y cross currency swap.
101 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
- Balances as of December 31, 2019
Interest bearing loans (ThUS$)
More than Debtor More than 3 More than More than More than More than 4 Obligation Up to 1 1 month More than 5 Effective Nominal company Debtor company name Currency Creditor's name months up 1 year up 2 years up 3 years up years up to 5 Total Amortization nominal month up to 3 years rate rate taspayer No. to 1 year to 2 years to 3 years to 4 years years value months
Bank obligations (continued): Banco Santander - Spain (Agencia Swedish 96.596.540-8 Inversiones CMPC S.A. US$ - - 2,599 2,563 2,563 645 - - 8,370 Semiannual 2.24% 8,972 Libor+0.65% * Export Credit Corporation) - Sweden (**) MUFG Bank, Ltd. (Administrative Agent) - 96.596.540-8 Inversiones CMPC S.A. US$ - 850 - - - - 98,418 - 99,268 Maturity 3.12% 100,000 Libor+1.05% * Japan (**) 96.532.330-9 CMPC Pulp SpA US$ Scotiabank - Chile 200,859 ------200,859 Monthly 2.49% 200,000 Libor+0.58% Nordea Bank AB (publ) (Agencia Swedish Foreign Absormex CMPC Tissue S.A. de C.V. US$ 2,400 - 2,201 4,402 4,402 4,402 1,347 - 19,154 Semiannual 2.37% 19,808 2.37% * Export Credit Corporation) - Sweden (**) Foreign Absormex CMPC Tissue S.A. de C.V. US$ Banco Nacional de México, S.A. 10 - 9,500 - - - - - 9,510 Maturity 2.75% 9,500 2.75% Banco Santander - España (Agencia Swedish Foreign La Papelera del Plata S.A. US$ 1,201 20 1,462 2,918 2,918 2,918 2,918 10,212 24,567 Semiannual 3.70% 24,546 3.70% * Export Credit Corporation) - Sweden Foreign La Papelera del Plata S.A. US$ Scotiabank - Chile - RUT 97.018.000-1 - 95 5,250 - - - - - 5,345 Maturity 2.99% 5,250 2.99% Foreign La Papelera del Plata S.A. ARS Banco HSBC Bank Ltd. - Argentina 4,542 ------4,542 Maturity 51.00% 4,542 51.00% Foreign La Papelera del Plata S.A. ARS Banco Patagonia S.A. - Argentina 1,670 ------1,670 Maturity 50.00% 1,670 50.00% Foreign Productos Tissue del Perú S.A. PEN Banco de Crédito del Perú - 8,442 ------8,442 Maturity 4.32% 8,351 3.66% Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 179 351 703 - - - - - 1,233 Monthly 6.99% 1,231 ECM+2.32% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 201 395 593 - - - - - 1,189 Monthly 8.27% 1,185 TJLP+2.32% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 122 237 356 - - - - - 715 Monthly 9.27% 711 TJLP+3.32% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 4 - 217 325 108 - - - 654 Monthly 6.60% 651 ECM+2.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil - 8 335 447 74 - - - 864 Monthly 8.23% 856 TJLP+2.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil - 5 201 268 45 - - - 519 Monthly 9.23% 514 TJLP+3.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 13 - - 417 455 37 - - 922 Monthly 6.73% 909 ECM+2.42% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil - 4 427 427 427 - - - 1,285 Monthly 8.37% 1,281 TJLP+2.42% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil - 3 - 384 384 - - - 771 Monthly 9.37% 769 TJLP+3.42% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 1,375 2,491 11,210 14,794 14,794 1,233 - - 45,897 Monthly 7.06% 47,080 ECM+2.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil (**) 2,315 4,150 18,029 24,669 24,614 - - - 73,777 Monthly 7.06% 76,290 TJLP+2.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil (**) 1,407 2,490 11,204 14,768 14,768 - - - 44,637 Monthly 7.06% 45,774 TJLP+3.28% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil (**) 1,454 2,801 12,603 16,520 16,520 - - - 49,898 Monthly 7.06% 52,015 2.50% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil (**) 288 519 2,334 3,090 3,090 - - - 9,321 Monthly 7.06% 9,457 TJLP+1.88% * Foreign CMPC Celulose Riograndense Ltda. BRL BNDES - Brazil 29 54 238 322 322 - - - 965 Monthly 7.06% 975 TJLP * Banco Santander - Spain and Nordea Bank AB Foreign CMPC Celulose Riograndense Ltda. US$ (publ) (Agencia Swedish Export Credit 6,298 - 6,167 11,888 11,888 11,888 11,888 11,899 71,916 Semiannual 4.07% 71,655 2.35% * Corporation) - Sweden Banco Santander - Spain and Nordea Bank AB Foreign CMPC Celulose Riograndense Ltda. US$ (publ) (Agencia Finnish Export Credit Ltd.) - - - 20,663 21,902 21,902 21,902 21,902 21,902 130,173 Semiannual 3.62% 132,000 2.41% * Finland Foreign CMPC Celulose Riograndense Ltda. US$ Banco Itaú - Brazil 30,028 ------30,028 Monthly 2.25% 30,000 2.25% Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 110 219 331 - - - - - 660 Monthly 4.50% 643 4.50% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 23 47 82 - - - - - 152 Monthly 4.50% 150 4.50% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 6 13 45 - - - - - 64 Monthly 5.50% 63 5.50% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 3 7 17 - - - - - 27 Monthly 5.50% 26 5.50% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 26 51 231 308 308 50 - - 974 Monthly 3.00% 963 3.00% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 3 5 23 31 31 16 - - 109 Monthly 3.00% 108 3.00% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 14 28 126 168 168 125 - - 629 Monthly 3.50% 620 3.50% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 26 48 215 285 287 287 287 - 1,435 Monthly 6.00% 1,400 6.00% * Foreign Melhoramentos CMPC Ltda. BRL Banco Itaú BBA S.A. - Brazil 67 134 605 200 - - - - 1,006 Monthly 10.18% 966 4.6%+TJLP * Foreign Melhoramentos CMPC Ltda. US$ MUFG Bank, Ltd. - United States (**) 336 - 50,000 - - - - - 50,336 Maturity 9.85% 50,000 3.4040% *
102 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(Continued)
Interest bearing loans (ThUS$)
More than Debtor More than 3 More than More than More than More than 4 Obligation Up to 1 1 month More than 5 Effective Nominal company Debtor company name Currency Creditor's name months up 1 year up 2 years up 3 years up years up to 5 Total Amortization nominal month up to 3 years rate rate taspayer No. to 1 year to 2 years to 3 years to 4 years years value months
Bank obligations (continued): Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco do Brasil 214 428 1,928 2,571 2,561 205 - - 7,907 Monthly 2.50% 7,829 2.50% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco do Brasil 2 3 16 21 21 9 - - 72 Monthly 3.00% 71 3.00% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco do Brasil 29 58 260 347 347 339 - - 1,380 Monthly 3.50% 1,361 3.50% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco do Brasil 60 121 544 725 725 725 518 - 3,418 Monthly 6.00% 3,339 6.00% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco do Brasil 70 139 626 835 835 835 - - 3,340 Monthly 9.50% 3,220 9.50% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco Bradesco S.A. - Brazil 14 27 123 162 155 155 142 13 791 Monthly 6.00% 773 6.00% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco Bradesco S.A. - Brazil 63 126 565 439 - - - - 1,193 Monthly 11.50% 1,142 11.50% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco Bradesco S.A. - Brazil 1 3 12 13 - - - - 29 Monthly 9.50% 28 9.50% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco Itaú - Brazil 21 41 186 248 248 83 - - 827 Monthly 9.50% 797 9.50% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Caixa Econômica Federal - Brazil 6 11 50 67 67 53 - - 254 Monthly 3.50% 251 3.50% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco Santander - Brazil 84 167 754 1,005 1,005 1,005 920 - 4,940 Monthly 12.20% 4,715 12.20% * Foreign Sepac - Serrados e Pasta e Celulose Ltda. BRL Banco Safra S.A. - Brazil 46 93 324 - - - - - 463 Monthly 9.84% 446 9.84% * Total bank obligations 255,619 24,684 163,355 127,529 126,032 46,912 138,340 44,026 926,497 Bonds payable: 96.596.540-8 Inversiones CMPC S.A. US$ Bono - Rule 144A - 6,927 - - - - 496,842 - 503,769 Maturity 4.79% 500,000 4.75% 96.596.540-8 Inversiones CMPC S.A. US$ Bono - Rule 144A - - 5,226 - - - - 493,199 498,425 Maturity 4.42% 500,000 4.38% 96.596.540-8 Inversiones CMPC S.A. US$ Bono - Rule 144A - - 4,063 - 498,039 - - - 502,102 Maturity 4.64% 500,000 4.50% 96.596.540-8 Inversiones CMPC S.A. US$ Bono - Rule 144A - - 2,734 - - 497,778 - - 500,512 Maturity 4.47% 500,000 4.38% 96.596.540-8 Inversiones CMPC S.A. UF Bono - Serie F, Reg. 570 CMF (**) - 3,034 - - - - - 260,142 263,176 Maturity 4.55% 264,671 4.30% 96.596.540-8 Inversiones CMPC S.A. UF Bono - Serie G, Reg. 733 CMF (**) - - 1,257 - - - - 184,264 185,521 Maturity 3.70% 189,051 3.50% 96.596.540-8 Inversiones CMPC S.A. UF Bono - Serie H, Reg. 570 CMF (**) 834 - 22,686 22,686 - - - 66,112 112,318 Maturity 1.77% 113,430 1.50% 96.596.540-8 Inversiones CMPC S.A. UF Bono - Serie M, Reg. 733 CMF (**) 2,034 ------182,762 184,796 Maturity 2.55% 189,051 2.20% 96.596.540-8 Inversiones CMPC S.A. UF Bono - Serie O, Reg. 928 CMF (**) - - 129 - - - - 97,712 97,841 Maturity 1.22% 94,525 1.69% Foreign Productos Tissue del Perú S.A. PEN Bono - Serie A - - 372 - - 15,074 14,554 - 30,000 Maturity 6.63% 30,148 6.63% Total bonds payable 2,868 9,961 36,467 22,686 498,039 512,852 511,396 1,284,191 2,878,460 Finance lease obligations: Foreign Protisa Colombia S.A. COP BBVA Colombia S.A. 1 1 5 7 - - - - 14 Monthly 0.93% 14 0.93% Foreign Protisa Colombia S.A. COP BBVA Colombia S.A. 1 1 ------2 Monthly 0.93% 2 0.93% Foreign Drypers Andina S.A. COP BBVA Colombia S.A. - 1 4 6 2 - - - 13 Monthly 0.97% 13 0.97% Foreign Forsac Perú S.A. US$ BBVA Banco Continental S.A. - Peru 201 402 1,806 2,240 2,241 - - - 6,890 Monthly 4.40% 6,890 4.40% Foreign Papelera Panamericana S.A. PEN Banco de Crédito del Perú 6 11 49 70 50 186 Monthly 8.00% 186 8.00% Foreign Papelera Panamericana S.A. PEN BBVA Banco Continental S.A. - Peru 95 83 42 52 57 60 64 28 481 Monthly 7.00% 481 7.00% Foreign Papelera Panamericana S.A. PEN Banco Interamericano de Finanzas - Peru 112 10 93 102 109 116 124 306 972 Monthly 7.70% 972 7.70% Foreign Productos Tissue del Perú S.A. PEN Scotiabank - Peru - 65 202 287 - - - - 554 Quarterly 7.45% 554 7.45% Foreign Productos Tissue del Perú S.A. PEN Scotiabank - Peru - 309 963 1,368 722 - - - 3,362 Quarterly 7.55% 3,362 7.55% Foreign Productos Tissue del Perú S.A. PEN Scotiabank - Peru - 1,784 5,565 7,944 8,587 - - - 23,880 Quarterly 8.10% 23,880 8.10% Foreign Productos Tissue del Perú S.A. PEN Scotiabank - Peru 243 - 747 1,067 1,153 926 - - 4,136 Quarterly 8.15% 4,136 8.15% 91.440.000-7 Forestal Mininco SpA CLP Sodexo Chile S.A. - RUT 94.623.000-6 4 10 46 59 62 68 - - 249 Monthly 10.00% 249 10.00% Total finance lease obligations: 663 2,677 9,522 13,202 12,983 1,170 188 334 40,739 Other obligations: Comercial e Industrial ERCO (Chile) Ltda. - 96.532.330-9 CMPC Pulp SpA US$ 139 278 1,247 1,674 1,685 1,696 1,707 20,141 28,567 Monthly 7.80% 28,567 7.80% RUT 76.163.730-4 Total other obligations 139 278 1,247 1,674 1,685 1,696 1,707 20,141 28,567 Total interest bearing loans 259,289 37,600 210,591 165,091 638,739 562,630 651,631 1,348,692 3,874,263 Total interest bearing loans at fair value 259,289 37,600 210,591 165,091 638,739 562,630 651,631 1,348,692 3,874,263 (*) Loans contracted with maturities of more than one year (**) Risks managed totally or partially through contracts rate swap y cross currency swap.
103 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement b) Hedging liabilities
These liabilities represent the cumulative income of currency forwards, the latter of which are used to hedge against the volatility of the cost to hedge financial risk due to changes in the price of currencies associated to sales of products and investment projects and oil swaps used to hedge against the volatility of contracts. Also includes interest rate swap and cross-currency swaps used to hedge obligations with banks and with the public.
- Balances as of December 31, 2020
Entitlements Obligations Fair value of Entities Nature of hedged risks Currency Amount Currency Amount the net liability Maturity ThUS$ ThUS$ ThUS$ Current liabilities: Banco BCI - Chile Flows from cardboard sales to Europe US$ 12,235 EUR 12,602 367 Maturity Banco Itaú Corpbanca - Chile Flows from cardboard sales to Europe US$ 5,308 GBP 5,501 193 Maturity BancoEstado - Chile Flows from cardboard sales to Europe US$ 18,470 EUR 19,024 554 Maturity BancoEstado - Chile Flows from cardboard sales to Europe US$ 3,198 GBP 3,313 115 Maturity Bank of America, N.A. - England Flows from cardboard sales to Europe US$ 1,899 GBP 1,914 15 Maturity Macquarie Bank Ltd. - Australia Flows from cardboard sales to Europe US$ 2,111 GBP 2,187 76 Maturity Scotiabank - Chile Flows from cardboard sales to Europe US$ 2,349 GBP 2,368 19 Maturity Banco BCI - Chile Flows from lumber sales to Europe US$ 2,472 EUR 2,577 105 Maturity Banco Itaú Corpbanca - Chile Flows from lumber sales to Europe US$ 824 EUR 859 35 Maturity Banco Itaú Corpbanca - Chile Flows from lumber sales to Europe US$ 1,062 GBP 1,071 9 Maturity BancoEstado - Chile Flows from lumber sales to Europe US$ 3,312 EUR 3,444 132 Maturity Bank of America, N.A. - England Flows from lumber sales to Europe US$ 4,827 EUR 5,149 322 Maturity Macquarie Bank Ltd. - Australia Flows from lumber sales to Europe US$ 4,840 EUR 5,157 317 Maturity Subtotal flows from sales 2,259 BNP Paribas - France Price of oil US$ 6,759 US$ 7,957 1,198 Maturity Goldman Sachs International - United Kingdom Price of oil US$ 5,106 US$ 5,975 869 Maturity JP Morgan Chase Bank, N.A. - England Price of oil US$ 1,653 US$ 1,862 209 Maturity Subtotal prices of oil 2,276 Banco Santander - Brazil Bank obligations BRL 48,318 US$ 50,629 2,311 Semiannual Bank of America Merrill Lynch Banco Múltiplo S.A. - Brazil Bank obligations BRL 24,023 US$ 26,141 2,118 Semiannual JP Morgan Chase Bank, N.A. - Sao Paulo Branch - Brazil Bank obligations BRL 4,293 US$ 4,671 378 Semiannual Banco Santander - Chile Bonds payable UF 24,907 US$ 25,681 774 Semiannual Subtotal bank obligations and bonds 5,581 payable Total 177,966 188,082 10,116
Non-current liabilities: Banco Santander - Brazil Bank obligations BRL 44,946 US$ 48,341 3,395 Semiannual Bank of America Merrill Lynch Banco Múltiplo S.A. - Brazil Bank obligations BRL 24,905 US$ 25,294 389 Semiannual JP Morgan Chase Bank, N.A. - Sao Paulo Branch - Brazil Bank obligations BRL 3,105 US$ 3,199 94 Semiannual MUFG Bank, Ltd. - United States Bank obligations US$ 95,213 US$ 100,751 5,538 Semiannual Scotiabank - Chile Bank obligations US$ 5,882 US$ 5,980 98 Semiannual Banco Santander - Chile Bonds payable UF 176,402 US$ 182,438 6,036 Semiannual JP Morgan Chase Bank, N.A. - England Bonds payable UF 202,959 US$ 214,039 11,080 Semiannual Scotiabank - Chile Bonds payable UF 146,236 US$ 152,620 6,384 Semiannual Subtotal bank obligations and bonds 33,014 payable Total 699,648 732,662 33,014
104 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
- Balances as of December 31, 2019
Entitlements Obligations Fair value of Entities Nature of hedged risks Currency Amount Currency Amount the net liability Maturity ThUS$ ThUS$ ThUS$ Current liabilities: Scotiabank - Chile Exchange rate of term deposit US$ 15,073 CLP 15,627 554 Maturity Subtotal exchange rate 554 Banco Itaú Corpbanca - Chile Flows from lumber sales to Europe US$ 318 GBP 325 7 Maturity Banco Santander - Chile Flows from lumber sales to Europe US$ 1,976 EUR 1,993 17 Maturity Scotiabank - Chile Flows from lumber sales to Europe US$ 6,778 EUR 6,801 23 Maturity Scotiabank - Chile Flows from lumber sales to Europe US$ 971 GBP 1,000 29 Maturity Subtotal flows from sales 76 Morgan Stanley & Co. International plc - England Price of oil US$ 1,212 US$ 1,592 380 Maturity Subtotal prices of oil 380 Banco Santander - Brazil Bank obligations BRL 50,558 US$ 52,112 1,554 Semiannual JP Morgan Chase Bank, N.A. - Sao Paulo Branch - Brazil Bank obligations BRL 3,901 US$ 4,118 217 Semiannual Banco Santander - Chile Bonds payable UF 23,095 US$ 25,681 2,586 Semiannual Subtotal bank obligations and bonds 4,357 payable Total 103,882 109,249 5,367
Non-current liabilities: Banco Santander - Brazil Bank obligations BRL 85,659 US$ 95,219 9,560 Semiannual Bank of America Merrill Lynch Banco Múltiplo S.A. - Brazil Bank obligations BRL 44,604 US$ 49,458 4,854 Semiannual JP Morgan Chase Bank, N.A. - Sao Paulo Branch - Brazil Bank obligations BRL 6,510 US$ 7,570 1,060 Semiannual Scotiabank Inverlat S.A. - Mexico Bank obligations US$ 12,885 M XN 12,891 6 Semiannual Banco BCI - Chile Bonds payable UF 48,859 US$ 51,053 2,194 Semiannual Banco de Chile Bonds payable UF 48,918 US$ 51,055 2,137 Semiannual Banco Santander - Chile Bonds payable UF 189,213 US$ 208,119 18,906 Semiannual JP Morgan Chase Bank, N.A. - England Bonds payable UF 194,552 US$ 209,314 14,762 Semiannual Scotiabank - Chile Bonds payable UF 140,685 US$ 152,620 11,935 Semiannual Subtotal bank obligations and bonds 65,414 payable Total 771,885 837,299 65,414 c) Accrued interest payable
The other current financial liabilities account includes accrued interest payable totaling ThUS$45,051 as of December 31, 2020 (ThUS$29,437 as of December 31, 2019).
22.2. Additional information on main financial liabilities a) Interest bearing loans
The most significant interest-bearing loans held by the indicated subsidiaries are detailed as follows:
(1) Inversiones CMPC SA with Banco Santander - Spain (Swedish Export Credit Corporation Agency) - Sweden: In December 2018, La Palelera del Plata subscribed a loan for a maximum amount of US$35.06 million to finance payments to suppliers associated with the construction project of P4 Paper Machine at a fixed interest rate of 3.70%, with capital amortization maturity and semi-annual interest payment. In December 2020, the loan was renewed in the name of Inversiones CMPC S.A. in exchange of an intercompany loan, maintaining its payment conditions. The obligations for this operation as of December 31, 2020, amount to US$29.11 million.
(2) Inversiones CMPC S.A. with MUFG Bank, Ltd. (Administrative Agent) – Japan, subscribed a syndicated loan in Japan for an amount of US$100 million for a 5-year-term, with semi-annual payments, at an interest rate of 180 days Libor + 1.05%. This operation was led by MUFG Bank, Ltd. The Gunma Bank, Ltd., The Hyakugo Bank, Ltd., The Iyo Bank, Ltd., The Shiga Bank, Ltd., The Bank of Kyoto, Ltd., The Joyo Bank, Ltd., Nanto Bank Ltd. and The Hachijuni Bank Ltd. participated in the operation. In line with previous transactions, it was carried out under the “Green Loan” financing format, becoming the first green loan fully syndicated to Japanese banks, which is known as a “Samurai” structure. The principal balance owed as of December 31, 2020 amounts to US$100 million.
105 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The subsidiary Inversiones CMPC S.A. signed interest rate swap contracts with international banks whose fair value is presented in Other non-current financial liabilities.
(3) In May 2014, Absormex CMPC Tissue S.A. de C.V. signed a loan agreement with Nordea Bank AB (publ) (Swedish Export Credit Corporation) of Sweden as lender and agent, subscribed a loan for a maximum amount of US$40.80 million to finance payments to suppliers associated with the paper machine construction project in the State of Tamaulipas. Each payment made during the course of the project shall contemplate a portion of the following currencies and shall not exceed the following total amounts: US$7 million, SEK 126 million and EUR10 million. For each payment made an interest rate of 2.37% shall accrue on the dollar with semiannual payments. As of December 31, 2020, outstanding balance is US$15.41 million.
The subsidiary signed cross-currency swap contracts with international banks whose fair value is presented in Other non-current financial liabilities.
(4) CMPC Celulose Riograndense Ltda. signed a loan agreement with Banco Nacional de Desarrollo Económico y Social – BNDES: On December 13, 2012, the Company signed a contract for 6 long-term loans in local currency (Brazilian reals) for development of the Guaíba 2 project for a total of BRL2,510.66 million (US$483,13 million). On December 17, 2015, an amendment to this contract was signed adjusting the amount granted to BRL2,456.77 million (US$472.76 million), reallocating the amounts of loans A, B, C and D, leaving the distribution detailed as follows: “A” for BRL242.60 million indexed (US$46.68 million), at an average annual interest rate of ECM+2.28% with monthly payments from August 15, 2015 to January 15, 2023; loan “B” for BRL742.36 million (US$142.85 million), at an average annual interest rate of TJLP+2.28% with monthly payments from July 15, 2015 to December 15, 2022; loan “C” for BRL445.41 million (US$85.71 million), at an average annual interest rate of TJLP+3.28% with monthly payments from July 15, 2015 to December 15, 2022; loan “D” for BRL559.08 million (US$107.58 million), at an average annual interest rate of 2.5% with monthly payments from January 15, 2015 to December 15, 2022; loan “E” for BRL454.83 million (US$87.52 million), at an average annual interest rate of TJLP+1.88% with monthly payments from July 15, 2015 to December 15, 2022; loan “F” for BRL12.49 million (US$2.40 million), at an average annual interest rate of TJLP with monthly payments from July 15, 2015 to December 15, 2022. As of December 31, 2020, BRL661.11 million (US$127.22 million).
The subsidiary signed cross currency-swap contracts with international banks whose fair value is presented in Other non-current financial liabilities.
(5) CMPC Celulose Riograndense Ltda. and Banco Santander - España y Nordea Bank AB (publ) (signed a loan agreement with Swedish Export Credit Corporation (EKN) of Sweden: on December 20, 2013 to finance the Guaíba 2 project for US$119.16 million (SEK626.89 million and US$21.12 million) at an annual rate of 2.35% with semiannual principal payments from January 2016 to July 2025. As of December 31, 2020, the outstanding amount is US$119.16 million, with an effective annual rate of 4.07% and the total capital debt is US$59.71 million.
(6) CMPC Celulose Riograndense Ltda. with Banco Santander - España y Nordea Bank AB (publ) Finnish Export Credit Ltd. (Finnvera) of Finland: on December 20, 2013, to finance the Guaíba 2 project for US$220.00 million,
106 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement at an average annual rate of 2.41% with semiannual principal payments from June 2016 to December 2025. As of December 31, 2020, the effective annual rate is 3.62% and the outstanding amount is US$110.00 million.
(7) Melhoramentos CMPC Ltda. With BNP Paribas S.A. - United States: In July 2020, it signed a loan for BRL192.37 million (US$37.02 million) at an interest rate of 3.53%, with principal amortization at maturity on July 19, 2021 and payment semiannual interest.
Due to some debt contracts, described in the previous points, subscribed by the subsidiaries, Inversiones CMPC S.A., Melhoramentos CMPC Ltda., CMPC Celulose Riograndense Ltda., Absormex CMPC Tissue S.A. de C.V. and La Papelera del Plata S.A. must comply with certain financial indicators (covenants) calculated based on the Consolidated Financial Statements, such as maintaining a minimum equity capital, a maximum debt level and a minimum finance expense coverage ratio. As of December 31, 2020 and December 31, 2019, these indicators are met (see note 22.2.e). b) Bonds
(1) On April 18, 2012, subsidiary Inversiones CMPC S.A., through its subsidiary in the Cayman Islands, issued and placed a Bond in the United States amounting to US$500 million, in accordance with Rule 144 A Regulation S of the United States Securities Act of 1933, with a 10-year term. The nominal interest rate is 4.50% and the effective rate is 4.64%, plus a 2.65% spread over 10-year Treasury bonds. Principal is payable as of the maturity date of the bond, whereas interest is paid semiannually. The placement banks were Merrill Lynch, Pierce, Fenner & Smith Inc., HSBC Securities (USA) Inc., Mitsubishi UFJ Securities (USA) Inc. and J.P. Morgan Securities LLC.
The proceeds of the issue were used for general corporate purposes.
(2) On May 8, 2013, subsidiary Inversiones CMPC S.A. through its subsidiary in the Cayman Islands, issued and placed a Bond in the United States amounting to US$500 million, in accordance with Rule 144 A Regulation S, of the United States Securities Act of 1933, with a 10-year term. The nominal interest rate is 4.38%. The effective annual interest rate is 4.47%, plus a 2.70% spread over 10-year US Treasury bonds. Interest shall be paid semiannually. Acted as underwriters Deutsche Bank Securities Inc. y JP Morgan Securities LLC.
The proceeds of the issue were used for general corporate purposes.
(3) On September 10, 2014, subsidiary Inversiones CMPC S.A. issued and placed a Bond in the United States amounting to US$500 million, in accordance with Rule 144 A Regulation S, of the United States Securities Act of 1933, with a 10-year term. The nominal interest rate is 4.75%. The effective annual interest rate is 4.79%, plus a 2.25% spread over 10-year US Treasury bonds. The capital is payable on the maturity date bond, while the interest thereof is payable semi-annually. Acting as underwriters JP Morgan Securities LLC, Mitsubishi UFJ Securities (USA) Inc. and Santander Investment Securities Inc.
The proceeds of the issue were used for general corporate purposes.
(4) On April 4, 2017, subsidiary Inversiones CMPC S.A. issued and placed a Bond in the United States amounting to US$500 million, in accordance with Rule 144 A Regulation S, of the United States Securities Act of 1933,
107 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement with a 10-year term. The nominal interest rate is 4.38%. The effective annual interest rate is 4.42%, plus a 2.00% spread over 10-year US Treasury bonds. The capital is payable on the maturity date of the bond, while the interest thereof is payable semi-annually. Acting as placement banks Merrill Lynch, Pierce, Fenner & Smith Inc., JP Morgan Securities LLC, Santander Investment Securities Inc.
This issuance is in line with CMPC's sustainability objectives, since it met the requirements established by the World Bank "Green Bond Principles" (GBP), to be qualified as a green bond, which means that its resources will be used to finance or refinance projects with sustainable environmental benefits, that was the first issue of a Chilean company that meets these conditions.
(5) On January 8, 2020, the subsidiary Inversiones CMPC S.A. issued and placed a Bond in the United States amounting to US$500 million, in accordance with Rule 144 A Regulation S of the United States Securities Act of 1933, with a 10-year term. The nominal interest rate of 3.85% and the effective placement rate is 3.87% annually, with a spread over the 10-year Treasury bond of 2.00%. The principal is payable on the maturity date of the bond, while the interest on them is payable semi-annually. JP Morgan Securities LLC, Scotia Capital (USA) Inc., MUFG Securities Americanas Inc. and Santander Investment Securities Inc. acted as placement banks.
(6) On March 24, 2009, subsidiary Inversiones CMPC S.A., issued a Series "F" Bond registered in the Securities Registry of the CMF under No. 570, for a 21-year term, for an amount of UF7 million (US$286.23 million). This obligation contemplates semiannual payments with a compound annual interest rate of 4.30%. In addition, this bond was placed at a discount so that the effective placement rate was 4.55%. The principal will be paid upon maturity.
Inversiones CMPC S.A. entered into cross-currency swap contracts with local banks whose fair value is presented in other non-current financial assets.
(7) On April 21, 2014, subsidiary Inversiones CMPC S.A., issued a Series "G" Bond registered under No. 733 in the Securities Registry of the CMF, amounting to UF5 million equivalent to US$204.45 million. This obligation contemplates semi-annual interest payments with a compound annual interest rate of 3.50% and full payments of principal on April 21, 2039. This bond was also placed at a discount, therefore the effective placement rate was 3.70% in UF. This bond can be prepaid at par value from the fifth year.
Inversiones CMPC S.A. entered into cross-currency swap contracts with local banks whose fair value is presented in other non-current financial assets.
(8) On July 3, 2018, subsidiary Inversiones CMPC S.A., issued a Series "H" Bond registered under No. 570 in the Securities Registry of the CMF, amounting to UF3 million, with a remaining balance of UF2.4 million, equivalent to US$98.13 million. This obligation contemplates semi-annual interest payments with a compound annual interest rate of 1.50% and partial payments of principal in July 2020, July 2021 and July 2025. This bond was also placed at a discount, therefore the effective placement rate was 1.77% in UF
Inversiones CMPC S.A. entered into cross-currency swap contracts with local banks whose fair value is presented in other non-current financial assets.
108 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(9) On July 3, 2018, subsidiary Inversiones CMPC S.A., issued a Series "M" Bond registered under No. 733 in the Securities Registry of the CMF, amounting to UF5 million equivalent to US$204.45 million. This obligation contemplates semi-annual interest payments with a compound annual interest rate of 2.20% and full payments of principal on July 3, 2028. This bond was also placed at a discount; therefore the effective placement rate was 2.55% in UF. This bond can be prepaid at par value from the fifth year.
Inversiones CMPC S.A. entered into cross-currency swap contracts with local banks whose fair value is presented in other non-current financial assets.
(10) On July 4, 2019, subsidiary Inversiones CMPC S.A., issued a Series "O" Bond registered under No. 928 in the Securities Registry of the CMF, amounting to UF2.5 million equivalent to US$102.22 million. This obligation contemplates semi-annual interest payments with a compound annual interest rate of 1.69% and full payments of principal on June 1, 2029. This bond was also placed at a discount; therefore the effective placement rate was 1.22% in UF.
Inversiones CMPC S.A. entered into cross-currency swap contracts with local banks whose fair value is presented in other non-current financial assets.
(11) On October 23, 2018, the subsidiary Productos Tissue del Perú S.A. issued and placed a series "A" Bond at the local market of Peru for an amount of PEN 100.00 million (US$27.59 million), whose issuance was subject to local rules and legislation. The term of the bond is 6 years, with capital amortizations on October 23, 2023 and at maturity. The bond will pay interest semiannually at a nominal interest rate of 6.625%, same effective rate of placement. The placement agent was Cavali S.A. I.C.L.V.
This issuance goes in line with the sustainability objectives of CMPC, since it met the requirements established in the "Green Bond Principles" (GBP) of the World Bank, to be qualified as a green bond, which means that its resources will be used to finance or refinance projects with sustainable environmental benefits, this being the second issuance at the Company level and the first one made in the Peruvian stock market that meets these conditions.
These obligations contemplate the fulfillment of some financial covenants calculated based on the Consolidated Financial Statements of Empresas CMPC S.A. and subsidiaries, which as of December 31, 2020 and 2019, are met and which refer to maintaining a minimum equity, a maximum level of indebtedness and a minimum level of coverage of financial expenses (see note 22.2 e). c) Net effect of derivatives taken in Chile
(1) On August 25, 2016, subsidiary Inversiones CMPC S.A. entered into an interest rate swap with Banco Scotiabank Blue – Chile, to hedge 100% of a loan for US$17 million. Through this contract, the 180-day Libor + 0.8% rate was changed to a fixed rate in dollars of 2.20%. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets, with hedge accounting treatment.
(2) On June 14, 2016, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Banco Scotiabank Blue – Chile, which swapped UF500,000 of Series “G” bond No. 733 issued for UF5 million to a liability in the amount of US$18.91 million with a fixed interest rate of 3.50% for the entitlement in UF and
109 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
4.18% for the obligation in dollars, respectively. As of December 31, 2020, the fair value of this contract is presented in other non-current financial liabilities, with hedge accounting treatment
(3) On June 13, 2016, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Scotiabank Azul – Chile, which swapped UF500,000 of Series G bond No. 733 issued for UF5 million to a liability in the amount of US$18.93 million with a fixed interest rate of 3.50% for the entitlement in UF and 4.20% for the obligation in dollars, respectively. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets, with hedge accounting treatment.
(4) On May 31, 2016, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Banco Santander - Chile which swapped UF1 million of Series “F” bond No. 570 issued for UF7 million to a liability in the amount of US$37.67 million with a fixed interest rate of 4.30% for the entitlement in UF and 4.99% for the obligation in dollars, respectively. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets, with hedge accounting treatment.
(5) On May 23, 2016, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Banco Santander - Chile which swapped UF1 million of Series “G” bond No. 733 issued for UF5 million to a liability in the amount of US$37.40 million with a fixed interest rate of 3.50% for the entitlement in UF and 4.37% for the obligation in dollars, respectively. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets, with hedge accounting treatment.
(6) On August 4, 2014, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Banco de Chile - Chile which swapped UF1.2 million of Series “G” bond No. 733 issued for UF5 million to a liability in the amount of US$50.61 million with a fixed interest rate of 3.47% for the entitlement in UF and 4.50% for the obligation in dollars, respectively. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets, with hedge accounting treatment.
(7) On August 4, 2014, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Banco BCI - Chile which swapped UF1.2 million of Series “G” bond No. 733 issued for UF5 million to a liability in the amount of US$50.60 million with a fixed interest rate of 3.47% for the entitlement in UF and 4.52% for the obligation in dollars, respectively. As of December 31, 2020, the fair value of this contract is presented in other non- current financial assets, with hedge accounting treatment.
(8) On December 11, 2013, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Banco Santander - Chile which swapped UF1.237 million of Series “F” bond No. 570 issued for UF7 million to a liability in the amount of US$53.96 million with a fixed interest rate of 4.30% for the right in UF and 5.06% for the obligation in dollars, respectively. On June 26, 2020, it was agreed to renew the contract to swap UF1.38 million of the Series “F” bond to a liability of US$60.28 million with a fixed interest rate of 4.30% for the entitlement in UF and 5.0589% for the obligation in dollars effective from March 24, 2020 to March 24, 2024. As of December 31, 2020, the fair value of this contract is presented in other non-current financial liabilities, with hedge accounting treatment.
(9) On December 10, 2013, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Banco Santander - Chile which swapped UF1.143 million of Series “F” bond No. 570 issued for UF7 million to a liability in the amount of US$50.00 million with a fixed interest rate of 4.30% for the entitlement in UF and 5.06% for
110 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement the obligation in dollars, respectively. On June 26, 2020, it was agreed to renew the contract to swap UF1.00 million of Series “F” bond to a liability of US$43.68 million with a fixed interest rate of 4.30% for the entitlement in UF and 5.0589% for the obligation in dollars effective from March 24, 2020 to March 24, 2024. As of December 31, 2020, the fair value of this contract is presented in other non-current financial liabilities, with hedge accounting treatment.
(10) On December 2, 2013, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Banco BBVA – Chile, which swapped UF1.12 million of Series “F” bond No. 570 issued for UF7 million to a liability in the amount of US$49.02 million with a fixed interest rate of 4.30% for the entitlement in UF and 5.15% for the obligation in dollars, respectively. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets, with hedge accounting treatment.
(11) On July 12, 2018, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Banco Santander - Chile which swapped UF3 million of Series “H” bond No. 570 issued for UF3 million to a liability in the amount of US$126.05 million with a fixed interest rate of 1.4944% for the entitlement in UF and 3.7060% for the obligation in dollars, respectively. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets, with hedge accounting treatment.
(12) On June 27, 2019, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with Scotiabank – Chile which swapped UF2.5 million of Series “O” bond No. 928 issued for UF2.5 million to a liability in the amount of US$102.57 million with a fixed interest rate of 1.6928% for the entitlement in UF and 3.97% for the obligation in dollars, respectively. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets, with hedge accounting treatment.
(13) On October 7, 2020, the subsidiary Inversiones CMPC S.A. entered into a cross currency swap contract with Banco BCI - Chile which swapped UF0.6 million of theSeries “G”bond No. 733 issued for UF5 million to a liability for US$21.64 million with a fixed interest rate of 3.47% for the entitlement in UF and 5.65% for the obligation in dollars, respectively. As of December 31, 2020, the fair value of this contract is presented in Other non-current financial assets, with hedge accounting treatment. d) Net effect of derivatives subscribed abroad
(1) Since 2014, subsidiary CMPC Celulose Riograndense Ltda. entered into cross-currency swaps with the Banco Nacional de Desarrollo Económico y Social – BNDES, to hedge a loan for BRL. Through these contracts the debt was swapped into dollars. These contracts was entered with Brazilian Banks: Bank of America Merril Lynch Múltiplo S.A., Banco Santander and JP Morgan Chase Bank, N.A. - Sao Paulo Branch. As of December 31, 2020, the fair values of these contracts are presented in other financial liabilities - current and non-current, based on maturity dates, with accounting treatment of cash flow hedging.
(2) In July 2017, subsidiary Absormex CMPC Tissue S.A. de C.V. entered into a cross-currency swap with Banco Santander - Mexico, to hedge an ECA loan for US$10 million. Through this contract, the fixed rate in dollars of 2.37% was change to a fixed rate of 7.495% and the debt was swapped into Mexican pesos. As of December 31, 2020, the fair value of this contract presented in other non-current financial assets with cash flow hedge accounting treatment.
111 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(3) In September 2017, subsidiary Absormex CMPC Tissue S.A. de C.V. entered into a cross-currency swap with Banco Scotiabank - Mexico, to hedge an ECA loan for US$5 million. Through this contract the rate was changed in dollar fixed rate of 2.37% to a fixed rate in Mexican pesos of 7.12% and the debt was swapped into Mexican pesos. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets with cash flow hedge accounting treatment.
(4) In January 2018, subsidiary Absormex CMPC Tissue S.A. de C.V. entered a cross-currency swap contract with Banco Scotiabank - Mexico, to cover US$12.56 million of the ECA credit. Through this contract, the fixed rate in dollars of 2.37% was changed to a fixed rate in Mexican pesos of 7.95% and part of the debt was redenominated to Mexican pesos. As of December 31, 2020, the fair value of this contract is presented under other non-current financial liabilities with a cash flow hedge accounting treatment.
(5) On July 12, 2018, subsidiary Inversiones CMPC S.A. entered into a cross-currency swap with JP Morgan Chase Bank, N.A. - Chile which swapped UF5 million of Series “M” bond No. 733 issued for UF5 million to a liability in the amount of US$209.44 million with a fixed interest rate of 2.188% for the entitlement in UF and 4.33% for the obligation in dollars, respectively. On August 7, 2020, it was agreed to modify the rate for the obligation in dollars to 4.3633%, effective from July 3, 2020 to July 3, 2028. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets, with hedge accounting treatment.
(6) On September 24, 2019, subsidiary Inversiones CMPC S.A. entered into an interest rate swap with MUFG Bank, Ltd. – New York which swapped the 100% of the loan of US$100 million. In this contract was changed the interest rate of 108 days Libor + 1.05% for and fixed interest rate in US$ of 2.76%. As of December 31, 2020, the fair value of this contract is presented in other non-current financial assets, with hedge accounting treatment.
(7) On October 14, 2020, the subsidiary Inversiones CMPC S.A. signed a cross currency swap contract with the Goldman Sachs International Bank - United Kingdom, which swapped UF0.4 million of the Series “F” bond No. 570 issued for UF7 million to a liability in the amount of US$14.37 million with a fixed interest rate of 4.30% for the entitlement in UF and 6.99% for the obligation in dollars, respectively. As of December 31, 2020 the fair value of this contract is presented in Other non-current financial assets, with hedge accounting treatment. e) Financial commitments
CMPC maintains a liquidity policy which purpose is to ensure that the debt level does not put at risk its capability to pay obligations, thus generating adequate returns for its investors.
Currently, subsidiaries Inversiones CMPC S.A., CMPC Celulose Riograndense Ltda. and Absormex CMPC Tissue S.A. de C.V. (only with Nordea Bank AB) maintain certain debt instruments, in which Empresas CMPC S.A., by acting as guarantor, is subject to compliance with certain financial covenants.
As of December 31, 2020 and December 31, 2019, the financial commitments described below are fully complied with.
112 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The status of compliance with the covenants that CMPC is subject is detailed as follows:
Creditor / representative of Debtor subsidiary Type of debt /amount Covenants (1) Condition 12/31/2020 12/31/2019 creditors Financial debt with third parties/equity (adjusted Less than or equal to 0.8 0,53 0,50 according contracts) Finance cost coverage last 12 moving months Greater than or equal to 3.25 times EBITDA 4,98 6,09 Banco Santander - Spain and Greater than or equal to 71.58 million of Nordea Bank AB (publ) Bank obligations for ThUS$ 6,409 unidades de fomento plus 85% of new capital (Agency Swedish Export Credit 184.5 millions of 205.2 millions of increases Corporation) - Sweden Equity (adjusted according to contracts) unidades de fomento unidades de fomento (ThUS$ 3,528,410 as of December 31, 2020 (ThUS$ 7,544,037) (ThUS$ 7,757,547) and ThUS$ 3,307,993 as of December 31, 2019) Financial debt with third parties/equity (adjusted Less than or equal to 0.8 0,53 0,50 according contracts) Banco Santander - Spain and Greater than or equal to 71.58 million of Nordea Bank AB (publ) unidades de fomento plus 85% of new capital Bank obligations for ThUS$ 29,107 184.5 millions of 205.2 millions of (Agency Swedish Export Credit increases Equity (adjusted according to contracts) unidades de fomento unidades de fomento Inversiones CMPC S.A. Corporation) - Sweden (ThUS$ 3,528,410 as of December 31, 2020 (ThUS$ 7,544,037) (ThUS$ 7,757,547) and ThUS$ 3,307,993 as of December 31, 2019) MUFG Bank, Ltd. Financial debt with third parties/equity (adjusted Bank obligations for ThUS$ 100,000 Less than or equal to 0.8 0,53 0,50 (Administrative Agent) - Japan according contracts) Bonds payable. Bond series F for Financial debt with third parties/equity (adjusted Less than or equal to 0.8 0,53 0,50 7 million unidades de fomento (ThUS$ 286,226) according contracts) Bonds payable. Bond series G for Financial debt with third parties/equity (adjusted Less than or equal to 0.8 0,53 0,50 5 million unidades de fomento (ThUS$ 204,447) according contracts) Bonds payable. Bond series H for Financial debt with third parties/equity (adjusted Banco Santander - Chile Less than or equal to 0.8 0,53 0,50 2,4 million unidades de fomento (ThUS$ 98,135) according contracts) Bonds payable. Bond series M for Financial debt with third parties/equity (adjusted Less than or equal to 0.8 0,53 0,50 5 million unidades de fomento (ThUS$ 204,447) according contracts) Bonds payable. Bond series O for Financial debt with third parties/equity (adjusted Less than or equal to 0.8 0,53 0,50 2,5 million unidades de fomento (ThUS$ 102,224) according contracts)
(Continued)
113 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Creditor / representative of Debtor subsidiary Type of debt /amount Covenants (1) Condition 12/31/2020 12/31/2019 creditors Financial debt with third parties/equity (adjusted Less than or equal to 0.8 0,53 0,50 BNDES - Brazil Bank obligations for ThUS$ 130,768 according contracts) Finance cost coverage last 12 moving months Greater than or equal to 3.25 times EBITDA 4,98 6,09 Financial debt with third parties/equity (adjusted Less than or equal to 0.8 0,53 0,50 according contracts) Finance cost coverage last 12 moving months Greater than or equal to 3.25 times EBITDA 4,98 6,09 Banco Santander - Spain and Greater than or equal to 71.58 million of Nordea Bank AB (publ) Bank obligations for ThUS$ 59,710 unidades de fomento plus 85% of new capital (Agency Swedish Export Credit 184.5 millions of 205.2 millions of increases Corporation) - Sweden Equity (adjusted according to contracts) unidades de fomento unidades de fomento (ThUS$ 3,528,410 as of December 31, 2020 CMPC Celulose (ThUS$ 7,544,037) (ThUS$ 7,757,547) and ThUS$ 3,307,993 as of December 31, Riograndense Ltda. 2019) Financial debt with third parties/equity (adjusted Less than or equal to 0.8 0,53 0,50 according contracts) Finance cost coverage last 12 moving months Greater than or equal to 3.25 times EBITDA 4,98 6,09 Banco Santander - Spain and Greater than or equal to 71.58 million of Nordea Bank AB (publ) Bank obligations for ThUS$ 110,000 unidades de fomento plus 85% of new capital (Agencia Finnish Export Credit 184.5 millions of 205.2 millions of increases Ltd.) - Finland Equity (adjusted according to contracts) unidades de fomento unidades de fomento (ThUS$ 3,528,410 as of December 31, 2020 (ThUS$ 7,544,037) (ThUS$ 7,757,547) and ThUS$ 3,307,993 as of December 31, 2019) Financial debt with third parties/equity (adjusted Less than or equal to 0.8 0,53 0,50 according contracts) Finance cost coverage last 12 moving months Greater than or equal to 3.25 times EBITDA 4,98 6,09 Nordea Bank AB (publ) Greater than or equal to 71.58 million of Absormex CMPC (Agencia Swedish Export Bank obligations for ThUS$ 15,406 unidades de fomento plus 85% of new capital Tissue S.A. de C.V. 184.5 millions of 205.2 millions of Credit Corporation) - Sweden increases Equity (adjusted according to contracts) unidades de fomento unidades de fomento (ThUS$ 3,528,410 as of December 31, 2020 (ThUS$ 7,544,037) (ThUS$ 7,757,547) and ThUS$ 3,307,993 as of December 31, 2019)
(1) The determination of financial debt with third parties, equity (adjusted according to contracts) and financial expense coverage for the last 12 months are detailed in points 1, 2 and 3 below.
114 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The covenants that CMPC is subject and their respective calculations (with the accounts and balances as of December 31, 2020 and December 31, 2019), are detailed as follows:
1.- Ratio of financial debt with third parties / equity (adjusted for contracts) must be less than or equal to 0.8x
To calculate this restriction the following accounts are taken:
12/31/2020 12/31/2019 Financial debt with third parties / Equity (adjusted according to contracts), less than or equal to 0.8 ThUS$ ThUS$ i) Financial debt with third parties Current interest bearing loans (Note 22) 252,774 507,480 Non-current interest bearing loans (Note 22) 3,747,945 3,366,783 Hedging liabilities associated with instruments of current debt (note 22) 5,581 4,357 Hedging liabilities associated with instruments of non-current debt (note 22) 33,014 65,414 Other obligations (Note 22) (26,904) (28,567) Hedging assets associated with instruments of current debt (note 8) (269) (2,690) Hedging assets associated with instruments of non-current debt (note 8) (27,483) (14,278) Total financial debt with third parties 3,984,658 3,898,499 ii) Equity (adjusted according to contracts) Equity attributable to owners of the parent (Classified statements of financial position) 7,863,289 8,133,310 Less: Intangible assets other than goodwill (Consolidated Statement of Financial Position) (107,934) (125,250) Goodwill (Classified Statement of financial position) (211,318) (250,513) Total equity (adjusted acording to contracts) 7,544,037 7,757,547 Financial debt with third parties /Equity (adjusted according to contracts) 0.53 0.50 The limit for this covenant is 0.8 and is therefore complied with
2.- Coverage ratio of EBITDA over finance costs coverage for trailing 12 months must be at least to 3.25x
12/31/2020 12/31/2019 Interest cost coverage over the last 12 moving months greater than or equal to 3.25 ThUS$ ThUS$ i) EBITDA* (Last 12 moving months): Revenue of ordinary activities (Consolidated Statement of Comprehensive Results) 5,286,927 5,670,277 Cost of sales (Consolidated Statement of Comprehensive Results) (4,423,499) (4,562,448) Plus: Depreciation and amortization expenses (Note 34) 550,290 529,156 Cost of formation of harvested plantations (Note 13) 114,839 125,008 Higher cost of harvested plantations derived from revaluation for their natural growth (Note 13) 200,996 197,903 Less: Distribution costs (Consolidated Statement of Comprehensive Results) (242,309) (247,731) Administrative expenses (Consolidated Statement of Comprehensive Results) (294,425) (323,988) Other expenses, by function (Consolidated Statement of Comprehensive Results) (203,079) (219,367) Total EBITDA last 12 months moving months 989,740 1,168,810 ii) Dividends of associates: Dividends received classified as investments (consolidated statement of - - ca sh flow s) iii) Finance income (Consolidated Statement of Comprehensive Results) 10,270 20,703 iv) Finance costs (Consolidated Statement of Comprehensive Results) (200,911) (195,350) Finance cost coverage last 12 moving months ((i+ii+iii)/iv) 4.98 6.09 The limit for this covenant is 3.25 and is therefore complied with
115 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
3.- Equity (adjusted for contracts) greater than or equal to UF71,580,000
12/31/2020 12/31/2019 Equity (adjusted for contracts) greater than or equal to CLF 71,580,000 ThUS$ ThUS$ i) Equity adjusted according to contracts) required, expressed in thousands of dollars Value of Unidad de Fomento (UF) in thousands of dollars, at closing date 0.0409 0.0378 Equity adjusted according to contracts) required, expressed in thousands of dollars 2,926,864 2,706,448 Equity adjusted according to contracts) plus 85% of new capital increase, required, expressed 3,528,410 3,307,993 in thousands of dollars ii) Equity (adjusted according to contracts): Equity attributable to owners of the parent (Consolidated Statement of Financial Position) 7,863,289 8,133,310 Less: Tangible assets other than Goodwill (Consolidated Statement of Financial Position) (107,934) (125,250) Goodwill (Consolidated Statement of Financial Position) (211,318) (250,513) Total equity (adjusted according to contracts) as of closing date, exceeds the requirements 7,544,037 7,757,547
4.- Property, plant and equipment and biological assets
Empresas CMPC is subject to maintaining at least 70% of its total assets (property, plant and equipment) and biological assets in the forestry, pulp, and packaging segment. As of December 31, 2020 and December 31, 2019, 100% of the Company's property, plant and equipment and biological assets were in the operating segments mentioned above. It should be noted that if the level previously established is not maintained, an advance prepaid debt option is generated, but there is no default. f) Fair value of interest bearing loans
Considering that the average term of CMPC's debt is 5.12 years and that the average rate accruing on loans in dollars is 4.29% annually, CMPC's management considers that the Company could finance its operations with liabilities, in the manner and under market conditions similar to those currently agreed for its financial liabilities. It has therefore determined that the fair value of financial liabilities is approximate (±1%) or equivalent to its amortized carrying amount.
116 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement g) Maturity of contractual cash flows
The settlement of other current and non-current financial liabilities recorded as of December 31, 2020 and December 31, 2019, expressed in final amounts on the respective payment dates is detailed as follow:
Maturity of contracted cash flows More than 1 More than 3 91 days up to More than 5 Book value Up to 90 days year up to 3 years up to 5 Total 1 year years years years ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Balance as of December 31, 2020 Financial liabilities Bank loans 524,120 58,540 139,211 175,595 184,709 8,902 566,957 Bonds payable 3,423,644 30,559 131,995 1,244,419 747,464 2,086,697 4,241,134 Finance leases 52,955 3,989 11,921 17,235 4,054 19,492 56,691 Hedging liabilities 43,130 10,419 19,235 49,387 135,182 52,509 266,732 Total 4,043,849 103,507 302,362 1,486,636 1,071,409 2,167,600 5,131,514
Maturity of contracted cash flows More than 1 More than 3 91 days up to More than 5 Book value Up to 90 days year up to 3 years up to 5 Total 1 year years years years ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Balance as of December 31, 2019 Financial liabilities Bank loans 926,497 276,607 164,481 256,173 193,616 44,636 935,513 Bonds payable 2,878,460 23,702 116,235 744,922 1,184,483 1,545,018 3,614,360 Finance leases 69,306 4,277 12,662 32,407 4,651 20,896 74,893 Hedging liabilities 70,781 3,732 18,556 49,576 54,404 69,481 195,749 Total 3,945,044 308,318 311,934 1,083,078 1,437,154 1,680,031 4,820,515
Cash flows at maturity of the financial liabilities from operations with derivatives was calculated using currency exchange and interest rates current as of the closing date of these consolidated financial statements. h) Fair value hierarchy
The financial and hedging liabilities accounted for at fair value in the statement of financial position, have been measured based on the methodologies of IFRS 13. The following parameters have been considered for applying criteria in the determination of the fair value of financial liabilities:
Level I: Values or prices quoted in active markets for identical assets and liabilities. Level II: Information from sources other than the values quoted in Level I, but observable in markets for the assets and liabilities whether directly (prices) or indirectly (derived from prices). Level III: Information for assets and liabilities that are not based on observable market data
117 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
As of December 31, 2020 and December 31, 2019, financial liabilities and hedging liabilities measured at fair value are detailed as follows:
Hierarchy used to determine fair value Financial instruments measured at fair value Level I Level II Level III ThUS$ ThUS$ ThUS$ Balance as of December 31, 2020 Hedging liabilities - 43,130 - Total financial liabilities at fair value - 43,130 -
Balance as of December 31, 2019 Hedging liabilities - 70,781 - Total financial liabilities at fair value - 70,781 -
22.3. Reconciliation of liabilities arising from financing activities:
- Reconciliation as of December 31, 2020
Cash flows from (used in) financing Changes other than cash activities Increase Ending Beginning Increases Loan Interest (decrease) in balance as balance as Amounts Accrued (decreases) by Other financial liabilities reimbursement paid the currency of of January from loans interest other changes (1) (1) exchange December 1, 2020 (2) translation 31, 2020 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Movements of 2020 Other current financial liabilities Bank obligations 443,657 993,867 (1,355,805) (33,395) 26,147 (7,699) 114,307 181,079 Bonds payable 49,296 - (21,414) (128,170) 134,129 (1,427) 25,071 57,485 Liabilities due to finance leases 14,527 389 (18,272) (304) 2,617 (751) 16,004 14,210 Subtotal for current liabilities by 507,480 994,256 (1,395,491) (161,869) 162,893 (9,877) 155,382 252,774 financial activities Other non-current financial liabilities Bank obligations 482,839 - - - - (28,487) (111,311) 343,041 Bonds payable 2,829,164 492,611 - - - 64,014 (19,630) 3,366,159 Liabilities due to finance leases 54,780 - - - - (1,712) (14,323) 38,745 Subtotal for non-current liabilities by 3,366,783 492,611 - - - 33,815 (145,264) 3,747,945 financial activities Total 3,874,263 1,486,867 (1,395,491) (161,869) 162,893 23,938 10,118 4,000,719
(1) Gross values do not include the effects of hedging liabilities resulting from the payment of principal and interest, settlements and posting of collaterals. The Consolidated Statements of Cash Flows are presented at their net value, which effect amounts to ThUS$44,700 on “Repayment of loans” and ThUS$13,017 on “interest paid”. (2) The "Increases (decreases) for other changes" corresponds mainly to reclassifications from long to short term.
118 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
- Reconciliation as of December 31, 2019
Cash flows from (used in) financing Changes other than cash activities Increase Ending Beginning Increases Loan Interest (decrease) in balance as balance as Amounts Accrued (decreases) by Other financial liabilities reimbursement paid the currency of of January from loans interest other changes (1) (1) exchange December 1, 2019 (2) translation 31, 2019 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Movements of 2019 Other current financial liabilities Bank obligations 204,349 394,859 (301,398) (31,622) 32,096 (1,797) 147,170 443,657 Bonds payable 213,329 - (185,000) (128,426) 138,495 (2,405) 13,303 49,296 Liabilities due to finance leases 12,240 - (18,720) (221) 3,698 1,054 16,476 14,527 Subtotal for current liabilities by 429,918 394,859 (505,118) (160,269) 174,289 (3,148) 176,949 507,480 financial activities Other non-current financial liabilities Bank obligations 532,394 100,243 - - - (7,732) (142,066) 482,839 Bonds payable 2,784,935 102,595 - - - (42,363) (16,003) 2,829,164 Liabilities due to finance leases 61,704 4,481 - - - 547 (11,952) 54,780 Subtotal for non-current liabilities by 3,379,033 207,319 - - - (49,548) (170,021) 3,366,783 financial activities Total 3,808,951 602,178 (505,118) (160,269) 174,289 (52,696) 6,928 3,874,263
(1) Gross values do not include the effects of hedging liabilities resulting from the payment of principal and interest, settlements and posting of collaterals. The Consolidated Statements of Cash Flows are presented at their net value, which effect amounts to ThUS$25,103 on “Repayment of loans” and ThUS$5,815 on “interest paid”.
(2) The "Increases (decreases) for other changes" corresponds mainly to reclassifications from long to short term.
22.4. Committed line
In March 2017, the subsidiary Inversiones CMPC S.A. obtained a Revolving Credit Line with Banco Santander, Export Development Canada, Scotiabank & Trust (Cayman) Ltd. and The Bank of Tokyo-Mitsubishi UFJ, Ltd., acting as bookrunner. This credit line amounted to ThUS$400,000 with a maximum maturity of 3 years. In August 2018, this committed credit line was extended for two additional years (from September 13, 2020 to September 14, 2022) for a total amount of ThUS$200,000 with Banco Santander and Scotiabank & Trust (Cayman) Ltd.
In August 2020, the subsidiary Inversiones CMPC S.A. obtained a new Sustainable Committed Credit Facilty for environmental purposes from MUFG Bank, Ltd., Sumitomo Mitsui Banking Corporation, Export Development Canada and BNP Paribas Securities Corp., the latter acting as bookrunner. This line amounts to ThUS$100,000 with a maximum term of two years from the date the loan was granted. The interest rate is adjusted annually according to four sustainability indicators, defined based on material environmental aspects for the Company.
As of December 31, 2020, both lines are fully available.
119 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 23 - TRADE AND OTHER ACCOUNTS PAYABLE
Trade and other accounts payable are detailed as follows:
- Balances as of December 31, 2020
Trade and other accounts payable
Type of creditor Currency Up to 1 month 2 to 3 months 4 to 12 months Total Amortization
ThUS$ ThUS$ ThUS$ ThUS$ Suppliers ARS 28,403 1,595 - 29,998 Monthly Suppliers BRL 73,531 36,803 7,700 118,034 Monthly Suppliers CAD 28 - - 28 Monthly Suppliers CHF 4 - - 4 Monthly Suppliers UF 9,790 - - 9,790 Monthly Suppliers CLP 193,290 10,263 1 203,554 Monthly Suppliers COP 7,380 761 - 8,141 Monthly Suppliers EUR 18,462 1,642 28 20,132 Monthly Suppliers GBP 991 5 - 996 Monthly Suppliers JPY 54 - - 54 Monthly Suppliers M XN 23,113 3,614 15 26,742 Monthly Suppliers PEN 20,878 7,027 75 27,980 Monthly Suppliers SEK 185 11 - 196 Monthly Suppliers US$ 173,546 23,174 3,254 199,974 Monthly Suppliers UYU 3,312 71 - 3,383 Monthly Other payables ARS 5,010 - - 5,010 Monthly Other payables BRL 23,045 - - 23,045 Monthly Other payables CLP 37,356 - 2,447 39,803 Monthly Other payables COP 1,790 - - 1,790 Monthly Other payables GBP 43 - - 43 Monthly Other payables M XN 8,455 - - 8,455 Monthly Other payables PEN 2,199 - - 2,199 Monthly Other payables US$ 4,161 - 1,186 5,347 Monthly Other payables UYU 1,650 - - 1,650 Monthly Total 636,676 84,966 14,706 736,348
120 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
- Balances as of December 31, 2019
Trade and other accounts payable
Tipo Acreedor Currency Up to 1 month 2 to 3 months 4 to 12 months Total Amortization
ThUS$ ThUS$ ThUS$ ThUS$ Suppliers ARS 28,561 3,057 - 31,618 Monthly Suppliers BRL 91,732 28,542 4,920 125,194 Monthly Suppliers CAD 56 - - 56 Monthly Suppliers CHF 109 - - 109 Monthly Suppliers UF 4,633 - - 4,633 Monthly Suppliers CLP 214,026 13,007 188 227,221 Monthly Suppliers COP 6,421 1,269 - 7,690 Monthly Suppliers EUR 15,855 793 687 17,335 Monthly Suppliers GBP 454 - - 454 Monthly Suppliers JPY 37 - - 37 Monthly Suppliers M XN 24,260 1,854 - 26,114 Monthly Suppliers PEN 10,649 6,834 142 17,625 Monthly Suppliers SEK 104 1 - 105 Monthly Suppliers US$ 188,009 14,285 12,164 214,458 Monthly Suppliers UYU 3,131 369 13 3,513 Monthly Payable notes ARS 56 - - 56 Monthly Other payables ARS 4,694 - - 4,694 Monthly Other payables BRL 30,520 - - 30,520 Monthly Other payables CLP 36,059 - 1,537 37,596 Monthly Other payables COP 1,149 - - 1,149 Monthly Other payables GBP 52 - - 52 Monthly Other payables M XN 8,361 - - 8,361 Monthly Other payables PEN 843 - - 843 Monthly Other payables US$ 37,391 792 - 38,183 Monthly Other payables UTA (1) 15,906 - - 15,906 Monthly Other payables UYU 751 - - 751 Monthly Total 723,819 70,803 19,651 814,273
(1) Annual Tax Unit, is a unit of account used in Chile for tax purposes and fines, updated according to inflation. The values held in this currency correspond to the judgment of the price agreement in Chile.
The balances in CLP over 30 days correspond mainly to balances with local suppliers supported by formal agreements duly signed with the Ministry of Economy.
The amortized cost of trade and other accounts payable adequately represents the fair value of these items.
121 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Current and overdue trade and other accounts payable are detailed as follows:
Balance as of December 31, 2020 Balance as of December 31, 2019 Trade accounts with up to date Goods Services Other Total Goods Services Other Total payments ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Up to 30 days 247,934 272,055 82,236 602,225 226,978 288,877 146,823 662,678 From 31 to 60 days 51,834 7,457 - 59,291 33,082 15,305 - 48,387 From 61 to 90 days 23,686 1,989 - 25,675 11,112 10,512 792 22,416 From 91 to 120 days 7,294 479 1,186 8,959 1,782 4,399 - 6,181 From 121 to 365 days 3,233 67 2,447 5,747 11,205 728 1,537 13,470 Total 333,981 282,047 85,869 701,897 284,159 319,821 149,152 753,132 Average payment period in days 48 20 32 32 41 22 35 32 (unaudited)
Trade accounts payable and other past due accounts, according to the expiration date, are as follows:
Balance as of December 31, 2020 Balance as of December 31, 2019 Trade accounts with overdue Goods Services Other Total Goods Services Other Total payments ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Up to 30 days 20,410 11,367 - 31,777 33,696 24,385 - 58,081 From 31 to 60 days 522 718 - 1,240 435 1,061 - 1,496 From 61 to 90 days 317 503 - 820 202 310 - 512 From 91 to 120 days 142 55 - 197 143 96 - 239 From 121 to 180 days 63 106 - 169 89 91 - 180 More than 180 days 135 113 - 248 9 624 - 633 Total 21,589 12,862 - 34,451 34,574 26,567 - 61,141
Trade accounts payable overdue up to 30 days mainly refer to foreign suppliers and originate mainly from the mismatch between the payment schedule and the due dates registered for each document, which generates minor delays. Arrears in ranges greater than 30 days have their origin in different reasons, among which are contractual guarantees associated with investment projects and commercial discrepancies with suppliers in the process of regularization.
Trade accounts payable with overdue payments come mainly from foreign suppliers.
122 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 24 - ACCOUNTS PAYABLE TO RELATED PARTIES
As of December 31, 2020 and December 31, 2019, current accounts payable to related parties are detailed as follows:
Pending balance Terms of Explanation of the nature Related Nature of relationship Country 12/31/2020 12/31/2019 transactions of the compensation party Related party name Acounts payable detail Currency with related party of origin with related established to settle the taxpayer No. ThUS$ ThUS$ party transactions Current liabilities: 96.505.760-9 Colbún S.A. Corporate group Chile Purchase of energy 4,555 - CLP 30 days Monetary Empresa Nacional de Common shareholders at 92.580.000-7 Chile Purchase of services 254 710 CLP 30 days Monetary Telecomunicaciones S.A. the entity or its parent 76.218.856-2 Colbún Transmisión S.A. Corporate group Chile Purchase of energy 105 - CLP 30 days Monetary Seguros de Vida Security Previsión Controlled by board 99.301.000-6 Chile Insurance purchase 56 72 CLP 30 days Monetary S.A. member Common shareholders at 96.806.980-2 Entel PCS Telecomunicaciones S.A. Chile Purchase of services 49 147 CLP 30 days Monetary the entity or its parent 97.080.000-K Banco BICE Corporate group Chile Commissions 36 3 CLP 30 days Monetary 76.138.547-K Megarchivos S.A. Controller / Director Chile Purchase of services 32 29 CLP 30 days Monetary 96.656.410-5 BICE Vida Compañía de Seguros S.A. Corporate group Chile Insurance purchase 29 10 CLP 30 days Monetary
Common shareholders at Foreign Entel Perú S.A. Peru Purchase of services 10 - PEN 30 days Monetary the entity or its parent Consorcio Protección Fitosanitaria 96.657.900-5 Associated Chile Purchase of services 8 16 CLP 30 days Monetary Forestal S.A. Common shareholders at 96.563.570-K Entel Call Center S.A. Chile Purchase of services 4 - CLP 30 days Monetary the entity or its parent BICE Hipotecaria Administradora de 96.777.060-4 Corporate group Chile Purchase of services 1 2 CLP 30 days Monetary Mutuos Hipotecarios S.A. Foreign CMPC Europe GmbH & Co. KG Joint venture Germany Reimbursement 1 - EUR 30 days Monetary Entity with special 75.764.900-4 Fundación CMPC Chile Reimbursement - 12 CLP 30 days Monetary purpose Common shareholders at 96.697.410-9 Entel Telefonía Local S.A. Chile Purchase of services - 3 CLP 30 days Monetary the entity or its parent 96.895.660-4 Inversiones El Rauli S.A. Corporate group Chile Purchase of services - 1 CLP 30 days Monetary Total 5,140 1,005
123 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 25 – PROVISIONS AND CONTINGENT ASSETS AND LIABILITIES
Amounts provisioned as of December 31, 2020 and 2019, are detailed as follows:
12/31/2020 12/31/2019 Provisions ThUS$ ThUS$ Current: Provision for labor, civil and tax lawsuits 1,588 1,815 Other provisions (1) 240 2,650 Total 1,828 4,465 Non-current: Provision for labor, civil and tax lawsuits 13,741 8,605 Other provisions (1) 2,213 - Total 15,954 8,605
(1) Corresponds to provisions for compensation associated with contractual obligations with suppliers.
Movement of the mentioned provisions for the year is detailed as follows:
12/31/2020 12/31/2019 Movement ThUS$ ThUS$ Current: Beginning balance 4,465 2,160 Increase of the period 579 5,860 Provision used (282) (2,385) Transfer from (to) other provisions in long term (2,321) - Reversal of provision (232) (41) Increase (decrease) due to exchange differences (381) (1,129) Ending balance 1,828 4,465 Non-current: Beginning balance 8,605 9,232 Increase of the period 9,223 422 Provision used (4,548) (633) Labor lawsuits charged to Suzano (CMPC Celulose Riograndense Ltda.) 3,030 210 Transfer from (to) other provisions in short term 2,321 - Reversal of provisions (82) - Increase (decrease) due to exchange differences (2,595) (626) Ending balance 15,954 8,605
Considering the opinion of the Company's attorneys, CMPC has recorded provisions for lawsuits and others for the period ended December 31, 2020, for ThUS$9,802 (ThUS$6,282 as of December 31, 2019), to cover the eventual disbursements that may arise. Such contingencies were recognized in the current Consolidated Statements of Comprehensive Income.
Given the characteristics of these contingencies, it is not possible to determine a reasonable payment schedule, if any; nor any refund that can be obtained by them.
124 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
125 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Contingent liabilities consist of the following contingencies and restrictions: a) Direct guarantees
There are no guarantees as of December 31, 2020. b) Indirect guarantees
Empresas CMPC S.A. has granted guarantees to the following operations:
(1) Loans and bond issuances undertaken abroad by subsidiary Inversiones CMPC S.A., subscribed directly and through its agency in the Cayman Islands.
(2) Bond issuances in UF undertaken in Chile by subsidiary Inversiones CMPC S.A.
(3) The committed Credit Facility of the subsidiary Inversiones CMPC S.A. with Scotiabank & Trust (Cayman) Ltd. and Banco Santander, acting as bookrunner.
(4) The committed Sustainable Line of the subsidiary Inversiones CMPC S.A. with Sumitomo Mitsui Banking Corporation, Export Development Canada, MUFG Bank, Ltd. and BNP Paribas Securities, acting as bookrunner.
In the case of indirect guarantees, the creditor of the obligation guaranteed by Empresas CMPC S.A. is the holder of the instrument, since those instruments are transferable.
(5) Compliance by Absormex CMPC Tissue S.A. de C.V. (subsidiary in Mexico), with loans held with Nordea Bank AB (Swedish Export Credit Corporation of Sweden).
(6) Compliance by Melhoramentos CMPC Ltda. (subsidiary in Brazil), with the loan that this company holds with MUFG Bank, Ltd.
(7) Compliance by CMPC Celulose Riograndense Ltda. (subsidiary in Brazil), with the loans that this company holds with Banco BNDES – Brazil, with Banco Santander and Nordea Bank AB (Swedish Export Credit Corporation (EKN) of Sweden) and with Banco Santander and Nordea Bank AB (Finnish Export Credit Ltd. (Finnvera) of Finland). c) Restrictions
As a result of certain debt contracts held by Empresas CMPC’s the subsidiaries Inversiones CMPC S.A., CMPC Celulose Riograndense Ltda., Absormex CMPC Tissue S.A. de C.V. (only with Nordea Bank AB (publ)), and La Papelera del Plata S.A. and guaranteed by CMPC, Empresas CMPC must comply with certain financial indicators (covenants) calculated on the Consolidated Financial Statements, in reference to maintaining a minimum equity capital, a maximum debt level and a minimum financial expense coverage ratio. As of December 31, 2020, these indicators are met (see note 22.2 e).
126 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
As a result of loan agreement with Banco BNDES of Brazil, Banco Santander España and Nordea Bank AB (publ) (Swedish Export Credit Corporation) - Sweden and Banco Santander España and Nordea Bank AB (publ) (Finnish Export Credit Agency Ltd.) - Finland, the subsidiary CMPC Celulose Riograndense Ltda. of Brazil, must comply with certain indicators calculated based on its annual financial statements, related to maintaining and net debt on EBITDA.
The subsidiary Productos Tissue del Peru S.A. derived from a financial lease framework agreement with Banco Scotiabank - Peru, must comply with some indicators calculated on its Financial Statements (annual and semi- annual), referring to maintaining a maximum ratio of debt/EBITDA and a maximum level of indebtedness (total direct liabilities/equity). d) Lawsuits
The following is the most significant litigation in which CMPC is involved, including legal actions that present a minimum degree of possibility of occurrence is probable or possible and which claimed amounts exceed ThUS$100. They also include lawsuits whose amounts claimed are undetermined.
(1) Forestal Mininco SpA is claiming an administrative fine for cutting of native forest without a management plan before the Local Police Court of Lebu, for the sum of ThUS$451. A final judgment was issued, condemning the payment of a fine, an appeal was filed.
(2) Forestal Mininco SpA is being sued in an ordinary lawsuit for compensation for damages before the 10th Civil Court of Santiago, for the sum of ThUS$ 109. The case is in the trial stage.
(3) Forestal Mininco SpA is sued in a civil trial of termination of Contract with Compensation for Damages before the 1st Court of Letters of Los Angeles, amount ThUS$185. The case is in the trial stage.
(4) Forestal Mininco SpA is one of the defendants accused of infringement in a trial for clearing the forest without a management plan before the first Los Angeles Local Police Court, for the sum of ThUS$4,127. The litigation is at the single answering, conciliation and evidence hearing stage.
(5) Forestal Mininco SpA is jointly and severally sued in a labor lawsuit for compensation for damages due to an accident at work followed by the Labor Court of Los Angeles. Currently in the preparatory hearing stage, for the sum of ThUS$113.
(6) Forestal Mininco SpA is sued for compensation for damages due to extra-contractual liability at the second Civil Court of Los Angeles, for anamount of ThUS$933. The lawsuit is at the stage of answering the claim.
(7) CMPC Maderas SpA is sued in a civil damages compensation lawsuit, at the first Civil Court of Concepción, for an approximate amount of ThUS$315. In the first instance, the lawsuit against the Company was dismissed, currently pending appeal at theSupreme Court
(8) CMPC Maderas SpA is sued in a labor lawsuit for unfair dismissal and anti-union practice, at the Labor Court of Los Angeles. The lawsuit was dismissed and the provincial labor inspectorate files an appeal for annulment still pending for the sum of ThUS$189.
127 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(9) CMPC Maderas SpA is the main defendant in a labor lawsuit for compensation for damages for work accidents and moral damage at the Civil Court of Nacimiento for an amount of ThUS$116. The lawsuit is at the trial hearing stage.
(10) CMPC Maderas SpA is a joint defendant in a labor lawsuit for compensation of damages due to occupational disease at the Court of First Instance of Mulchén for an amount of ThUS$100. The lawsuit is at the stage of notification of the claim.
(11) CMPC Pulp SpA CMPC Pulp S.A. is sued in a lawsuit for compensation for moral damage, filed before of Thirty Civil Court of Santiago for an amount of ThUS$947. The judgment was favorable for the company in the first instance, and the appeals are currently pending in the Santiago Court of Appeals.
(12) CMPC Pulp SpA is sued in labor guardianship trial in the Civil Court of Nacimiento, for the amount of ThUS$523. The case is in the trial stage with the fifth continuation hearing suspended due to health conditions.
(13) CMPC Pulp SpA is a joint defendant in a labor lawsuit for compensation for damages due to a work accident before the first Labor Court of Santiago, for the sum of ThUS$661. The case is in the stage of answering the claim.
(14) Cartulinas CMPC SpA is part of an arbitration in which it has filed a lawsuit against a former Contractor for the sum of CLP 3,192,697,364 (ThUS$4,491). For its part, the Contractor Company has filed a claim against Cartulinas CMPC SpA for the sum of CLP26,881,014,862 (ThUS$37,810). On October 29, 2020 the arbitration decision was announced in which Cartulinas CMPC SpA was ordered to pay the sum of CLP 5,422,401,755 (ThUS$7,627) plus adjustment and interest, and the Contractor to pay Cartulinas CMPC SpA the sum of CLP 1,189,424,920 (ThUS$1,673) plus adjustment and interest. Regarding the ruling, a complaint was filled with the Santiago Court of Appeals, which is pending of resolution.
(15) Cartulinas CMPC SpA is sued in a labor lawsuit for Acts of Discrimination and Unjustified Dismissal before the 1st Civil Court of Linares, for the amount of ThUS$1,133. The hearing ends the suspension of the procedure and the case is in the hearing stage.
(16) Envases Impresos SpA is jointly and severally sued in a labor lawsuit for compensation for damages due to an accident at work before the Labor Court of San Bernardo. Currently the trial is in the preparatory hearing stage with no hearing scheduled at the moment, the amount is ThUS$422.
(17) Forsac SpA is a direct defendant in a labor lawsuit for an occupational accident and occupational disease filed at the Labor Court of Concepción, for the sum of ThUS$503. The case is at the trial hearing stage.
(18) Fabi Bolsas Industriales S.A. de Argentina faces labor lawsuits in the amount of ThUS$106.
(19) Forsac Perú S.A. faces labor proceedings in the amount of ThUS$163 and taxes for an amount of ThUS$112.
128 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(20) Forestal Bosques del Plata S.A. de Argentina faces labor lawsuits in the approximately amount of ThUS$227.
(21) La Papelera del Plata S.A. de Argentina faces labor complaints involving a total nominal amount of approximately ThUS$2,933 and civil lawsuits in the amount of ThUS$1,022.
(22) Productos Tissue del Perú S.A. faces labor lawsuits for an amount of ThUS$877.
(23) CMPC Celulose Riograndense Ltda. of Brazil is a party to an arbitration proceeding initiated by the Company against Mapfre Seguros Gerais S.A. due to the refusal to cover the incident that affected the recovery boiler on line 2 of the Guaiba plant (State of Rio Grande do Sul) in 2017. The lawsuit against the insurer was filed on August 30, 2018 before the defined Arbitral Tribunal, where it is requested that the contracted policy be complied with, paying CMPC for the damages that the described incident generated, amounting to an approximate amount of ThUS$320,000. On January 4, 2021 a partial sentence was issued by the Arbitration Tribunal, ruling that the incident described was in fact covered by the insurance policy contracted, leaving CMPC for a later discussion to determine the amount and nature of the damages that should be paid as compensation.
(24) CMPC Celulose Riograndense Ltda. of Brazil is sued in various labor lawsuits by its own workers or of greater complexity for the sum of ThUS$351, by contract workers for ThUS$925 and collective lawsuits by unions for ThUS$2,863. The tax and civil lawsuits of CMPC Celulose Riograndense Ltda. Involve total amounts of approximately ThUS$1,504.
(25) Melhoramentos CMPC Ltda. of Brazil, is involved in civil lawsuits for an approximate nominal amount of ThUS$3,431, tax for an amount of ThUS$3,533 and labor for a nominal amount of approximately ThUS$2,589, the latter figure in which legal reports requested by the Company assess the demanded labor benefits. The labor contingency is of the approximate sum of ThUS$1,038 and in civil matters for ThUS$109.
(26) Absormex CMPC Tissue S.A. de C.V. is a party in tax, civil and labor complaints that involve amounts of approximately ThUS$1,369.
(27) Protisa Colombia S.A. holds lawsuits against the Municipality of Gachancipá for an approximate amount of ThUS$1,000, for the settlement of compensation of mandatory urban assignments, which are pending resolution.
(28) CMPC Tissue S.A. is sued directly in a labor lawsuit for occupational accidents and diseases before the second Labor Court of Santiago, for the amount of ThUS$103. First instance ruling favorable to the Company and awaiting resolution of appeal for annulment.
(29) CMPC Tissue S.A. is sued in a cause of labor protection and in subsidy for unjustified dismissal before the second Labor Court of Santiago, for the amount of ThUS$244. The case is in the trial hearing stage.
(30) CMPC Tissue S.A. is sued in a civil suit for compensation for damages before the first Labor Court of Concepción. The case is in the discussion stage for the amount of ThUS$669. The case is in the discussion stage.
129 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(31) CMPC Tissue S.A. is sued in an ordinary lawsuit to collect pesos before the seventeenth Civil Court of Santiago. The case is in the stage of answering the demand, for the amount of ThUS$397. The case is in the trial stage and the procedure is suspended due to a state of catastrophe.
(32) Inversiones Protisa SpA claimed against the resolution of the Chilean Internal Revenue Service (SII) that rejected the deduction of a declared loss of an approximate total amount of ThUS$41,000. The SII challenged 7 accounts related mainly to the recognition of exchange differences of investments abroad, and accounts receivable and payable that Inversiones Protisa SpA has. This claim involves a recoverable tax asset (PPUA) total approximate of ThUS$6,500. The documentary and testimonial evidence has already been rendered during the probationary period, on March 16, 2020, the parties presented their observations on the evidence provided in the record. Waiting for the TTA to summon the parties to hear judgment and issue the first instance ruling. e) Provisions and contingencies resulting from business combinations
(1) The CMPC Celulose Riograndense Ltda. subsidiary is involved in some labor lawsuits, the contingency of which has been recognized in the Other long-term provisions account for an amount of ThBRL30,914 (ThUS$5,949). These labor lawsuits originated from events prior to the date of purchase of this subsidiary and according to the purchase contract QPA (Quota Purchase Agreement), are the responsibility of the seller Fibria Celulose S.A. (Today Suzano Papel e Celulose S.A.). Therefore, the losses resulting from these lawsuits will be reimbursed by the seller and consequently were accounted for in Accounts receivable - non-current, for an amount equivalent to the provision indicated above. It is understood that these contingencies do not generate risk on CMPC's equity.
130 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement f) Others
(1) Empresas CMPC S.A. maintains contracts that allow the release of guarantees in order to limit exposure due to the fulfillment of derivative contracts, signed by its subsidiaries with JP Morgan Chase Bank, N.A. - Brazil, Banco Santander - Chile, Bank of America Merrill Lynch Banco Múltiplo S.A. - Brazil, Banco de Chile, Banco BCI - Chile, BNP Paribas - France, Scotiabank - Chile, Goldman Sachs International - United Kingdom, Banco Santander - Brazil, JP Morgan Chase Bank, N.A. - England, Bank of America, N.A. - England, Scotiabank Inverlat S.A. - México, Banco Santander - México, MUFG Bank, Ltd. Japan, Banco MUFG Brasil S.A., Itaú Corpbanca - Chile and Morgan Stanley & Co. International plc - England. As of December 31, 2020, the current net amount of guarantees paid amounts to ThUS$53,319. g) Foreign investments
The Company's financial statements include the effect on the financial and economic position of CMPC companies located in countries such as Argentina, Uruguay, Peru, Mexico, Ecuador, Brazil and Colombia that arise from the economic environment in which these companies operate.
Actual future results will depend to a great extent on the evolution of those economies. The Company will support the development and operation of all of the business units abroad, committing resources that are necessary to carry out the activities of its subsidiaries.
The results of the subsidiary La Papelera del Plata S.A. and Naschel S.A. in Argentina have been adjusted as a result of the application of IAS 29, however, the Company understands that the future results of the subsidiary will be sufficient to return the investment.
131 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 26 - EMPLOYEE BENEFITS PROVISIONS
Employee benefits provisions as of December 31, 2020 and 2019, are detailed as follow:
12/31/2020 12/31/2019 Concepts Current Non-current Current Non-current ThUS$ ThUS$ ThUS$ ThUS$ Compensation for years of service 11,135 66,068 13,246 57,364 Medical assistance benefits 983 9,199 1,197 13,745 Seniority award 1,332 9,633 1,755 8,245 Employee vacations 38,879 - 34,736 - Other benefits (1) 29,485 1,231 25,646 827 Totales 81,814 86,131 76,580 80,181
(1) The “Other benefits” include annual bonus, profit sharing and thirteenth salary, among others.
26.1. Obligations for post-employment benefits and other actuarial liabilities a) Information and movements
The Company maintains different benefit plans with the employees of its subsidiaries in Chile and abroad, determining the obligation associated with a large part of them by means of actuarial calculations. Post- employment benefits refer to: i) Compensation for years of service: Contractual obligation of the Company to compensate its employees with a payment for each year of service independent of the reason the employee leaves the Company. ii) Medical assistance benefits: In 1997, subsidiary Melhoramentos CMPC Ltda. signed a commitment with the employee union in reference to providing medical assistance for its employees retired as of that date, considering the worker and his wife throughout his life and children up to 21 years old (up to 24 years old if they are studying). This medical assistance is provided by a health institution formed by Sao Paulo, Brazil paper companies, denominated SEPACO. iii) Additionally, the Company maintains implicit obligations related to an actuarial calculation for seniority awards.
132 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The movement of the Provisions for actuarial liabilities as of December 31, 2020 and December 31, 2019, is as follows:
12/31/2020 12/31/2019 Staff Staff Medical Seniority Medical Seniority Concepts severance severance a ssista nce awards a ssista nce awards indemnities indemnities ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Beginning balance 70,610 14,942 10,000 71,250 10,988 10,653 Acquisitions realized through combinations of 25 - - - - - businesses Cost of services current 1,908 - 2,154 1,889 - 1,375 Interest cost 2,497 755 392 2,840 896 458 Past service cost 1,877 - - 1,477 - - Actuarial Loss (Gain): Attributable to changes in actuarial assumptions 48 165 - (16) 2,035 - Attributable to experience adjustments 748 (1,380) - 3,994 2,745 - Payments (5,312) (947) (2,416) (6,507) (1,157) (1,533) Increase (decrease) due to exchange differences 4,802 (3,353) 835 (4,317) (565) (953) Ending balance 77,203 10,182 10,965 70,610 14,942 10,000 Current liabilities balance 11,135 983 1,332 13,246 1,197 1,755 Non-current liabilities balance 66,068 9,199 9,633 57,364 13,745 8,245
The amount recognized in income for both periods, for actuarial liabilities, according to Note 2.20, is as follows:
Year 2020 2019 Staff Staff Medical Seniority Medical Seniority Concepts severance severance a ssista nce awards a ssista nce awards indemnities indemnities ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Cost of services current 1,908 - 2,154 1,889 - 1,375 Interest cost 2,497 755 392 2,840 896 458 Past service cost 1,877 - - 1,477 - - Effect of any settlement 1,788 - (5) 3,244 - 133 Total recognized in income 8,070 755 2,541 9,450 896 1,966 b) Actuarial assumptions
The actuarial assumptions for the calculation of provisions for employee benefits are as follows:
12/31/2020 12/31/2019 Staff Staff Medical Seniority Medical Seniority Concepts severance severance a ssista nce awards a ssista nce awards indemnities indemnities Annual nominal discount rate 4.09% 6.09% 4.09% 4.09% 6.81% 4.09% Average labor turnover rate, dismissal 5.88% - 5.88% 5.88% - 5.88% Average labor turnover rate, voluntary resignation 6.85% - 6.85% 6.85% - 6.85%
Salary Growth Rate 1.00% - 1.00% 1.00% - 1.00% Estimated inflation rate 3.00% 3.25% 3.00% 3.00% 3.75% 3.00% Estimated rate of medical inflation - 5.83% - - 6.34% - Retirement age, men 65 - 65 65 - 65 Retirement age, women 60 - 60 60 - 60 Mortality rate RV - 2014 AT 71 RV - 2014 RV - 2014 AT 71 RV - 2014 Disability rate 30% RV - 2014 - 30% RV - 2014 30% RV - 2014 - 30% RV - 2014
133 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement c) Sensitivity analysis
It is estimated that a change of 100 basis points in the assumptions will affect the valuation of employee benefit obligations in the following way:
12/31/2020 12/31/2019 Effect + 100 Effect - 100 Effect + 100 Effect - 100 Base points Base points Base points Base points ThUS$ ThUS$ ThUS$ ThUS$ Staff severance indemnities Annual discount rate (nominal) (4,262) 4,840 (3,974) 4,534 Salary growth rate 3,004 (2,676) 2,663 (2,366) Average turnover rate (233) 272 (17) 32 Benefit for medical assistance: Annual discount rate (nominal) (754) 814 (1,129) 1,218 Señority awards: Annual discount rate (nominal) (595) 668 (556) 624 Salary growth rate 682 (618) 640 (580) Average turnover rate (1,144) 1,425 (1,076) 1,320
The sensitivity analysis is based on changes in a single assumption, while the other assumptions remain unrecognized.
26.2. Obligations for employee benefits current and non-current a) Benefits for participation in results
The Brazilian subsidiary CMPC Celulose Riograndense Ltda. has a collective agreement with the workers that establishes the annual accrual of a participation in the results according to established goals. The payment of the benefit takes place every 3 years, and the balance presented in the liability is divided between current and non-current based on the date of settlement of the commitments. b) Employee vacations
The balance of employee vacations corresponds to the value of pending vacation days accrued by the Company's personnel, determined in accordance with labor legislation prevailing in each country.
134 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
26.3. Employee related expenses
The Company expensed the following employee related expenses:
Year Concepts 2020 2019 ThUS$ ThUS$ Wages and salaries 395,736 410,838 Social security contributions 36,676 39,784 Expenses due to other benefits in short term 81,613 97,655 Compensation for years of service 5,573 6,610 Expenses due to other benefits in long term 2,264 1,722 Other expenses of employees 36,172 37,614 Total employee expenses 558,034 594,223 Stock variation adjustment (absorption costs) 1,448 (2,998) Total charged to income (cost of sales) 559,482 591,225
NOTE 27 - OTHER NON-FINANCIAL LIABILITIES
As of December 31, 2020 and December 31, 2019, other current and non-current non-financial liabilities are as follows:
12/31/2020 12/31/2019 ThUS$ ThUS$ Current: Accrued dividends according to the Company's policy 3,586 29,742 Customer advances 2,399 2,964 Anticipated sales 37,209 35,401 Other 454 40 Total 43,648 68,147
Non-current: Escrow for purchases through combination of businesses 45,790 4,962 Obligations to third parties 1,089 2,032 Total 46,879 6,994
135 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 28 - EQUITY
28.1. Issued capital
As of December 31, 2020 and December 31, 2019, the capital of CMPC amounts to ThUS$1,453,728 divided into 2,500,000,000 registered shares, of equal value, without par value, fully subscribed and paid.
There are no changes in the number of shares during the period covered in these Consolidated Financial Statements.
28.2. Other reserves
As of December 31, 2020 and 2019, other reserves that form part of the Company's equity are detailed as follows:
12/31/2020 12/31/2019 Other reserves ThUS$ ThUS$ Foreign currency translations differences reserve (955,137) (720,531) Cash flows hedging reserve 10,287 27,230 Actuarial profits or losses on defined benefit plans reserve (29,877) (30,465) Other miscellaneous reserves 249,056 249,049 Total other reserves (725,671) (474,717)
Foreign currency translation reserves: the amounts and balances of the foreign currency translation reserve in equity relates to the effects generated in the translation of the financial statements of subsidiaries whose functional currency is different than the presentation currency of the consolidated financial statements.
The mentioned effects relate mainly to adjustment to the investments accounted for using the equity method and to the foreign currency translation originated in non-current accounts receivable and/or payable between the company and its subsidiaries.
The purpose of this reserve is to avoid effects on income due to changes in the exchange rate affecting the equity of subsidiaries with functional currency other than the dollar.
136 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Equity movements are detailed as follows:
12/31/2020 ThUS$ Balance of foreign currency translation differences reserve as of January 1, 2019 (624,398)
Plus: Net movements from foreign exchange variations adjustments in 2019 (96,133) Balance as of December 31, 2019 (720,531) Plus: Net movements from foreign exchange variations in 2020 (234,606) Balance as of December 31, 2020 (955,137)
The changes in equity of the subsidiaries that originate them, is the following:
For the period ended December 31, 2020 For the period ended December 31, 2019 Foreign curr. Total foreign Foreign curr. Total foreign Functional Adjustment to Translation currency Adjustment to Translation currency Company Country currency equity value diff. in non- translation equity value diff. in non- translation current accts. difference current accts. difference ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ CMPC Tissue S.A. Chile CLP 84,750 25,056 109,806 (90,105) (41,038) (131,143) Melhoramentos CMPC Ltda. Brazil BRL (153,216) (16,403) (169,619) 24,982 (2,086) 22,896 Protisa Colombia S.A. Colombia COP (6,555) - (6,555) 4,521 - 4,521 La Papelera del Plata S.A. Argentina ARS (44,570) (30,162) (74,732) 11,968 (51,734) (39,766) Grupo ABS Internacional S.A. de C.V. Mexico M XN (28,167) - (28,167) 30,670 - 30,670 CMPC Tissue Perú S.A.C. Peru PEN (1,624) - (1,624) 1,598 - 1,598 Inversiones Protisa SpA Chile CLP (8,737) (2,109) (10,846) 9,377 2,774 12,151 CMPC Inversiones de Argentina S.A. Argentina ARS (7,814) - (7,814) (14,446) - (14,446) Absormex CMPC Tissue S.A. de C.V. Mexico M XN 1,269 (1,225) 44 (1,826) 805 (1,021) Others (42,377) (2,722) (45,099) 18,407 - 18,407 Total (207,041) (27,565) (234,606) (4,854) (91,279) (96,133)
Cash flow hedge reserve: this reserve arises from the application of hedge accounting on certain financial assets and liabilities.
The part of this reserve originated by hedging of sales, costs and by financial obligations will be transferred to the statement of comprehensive income within equity at the end of the term of the contracts or when the operation stops qualifying for hedge accounting, whichever occurs first. The part of this reserve that arises from cash flow hedging on investment projects will be transferred to property, plant and equipment at the end of the term of the contracts or to the statement of comprehensive income if the operation stops qualifying for hedge accounting, whichever occurs first.
The purpose of this reserve is to affect the statement of comprehensive income for the period or assets only when hedges are settled.
The variation of the period corresponds mainly to the changes observed in the fair value of the specific financial instruments. Specifically, a loss of ThUS$50,341 associated with balance hedging contracts, and ThUS$7,134 associated with contracts for hedges of commodities (oil), which has been compensated with a gain of ThUS$2,136 in sales coverage in Euro and Pound Sterling.
In addition, settled hedges of the year generated an increase profit or loss of ThUS$36,151 in Cash flow hedging reserve and the net current tax associated with the aforementioned items amounts to ThUS$6,517.
137 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Actuarial profits/losses on defined benefits plans reserve: this change in the reserve is generated on the application of updated variables (discount rate, salary growth rate, employee turnover, etc.) in the actuarial calculations of termination benefits in accordance with IAS 19.
Other miscellaneous reserves: the balance as of December 31, 2020 and December 31, 2019, corresponds to the following concepts:
12/31/2020 12/31/2019 Types of reserves ThUS$ ThUS$ Future capital increase reserve 46,300 46,300 Adjustment of property, plant and equipment to book value 36,507 36,507 Equity changes in subsidiaries and associates 113,529 113,522 Price-level restatement of paid-in capital as per Circular 456 (15,721) (15,721) Effect of exchange of shares in the merger of Industrias Forestales S.A. 84,204 84,204 Share repurchase (14,839) (14,839) Other (924) (924) Total 249,056 249,049
The balance of these reserves is designated for future capitalizations.
As of the first-time application of IFRS (January 1, 2008) the main movements in Other reserves form part of the Company's other comprehensive income, accumulating a negative amount of ThUS$912,978 as of December 31, 2020 (negative amount of ThUS$662,024 as of December 31, 2019).
28.3. Retained Earnings (Losses)
The retained earnings (losses) account as of December 31, 2020, decreased as compared to 2019, due to profit (loss) for the year, detailed as follows:
12/31/2020 12/31/2019 ThUS$ ThUS$ Retained earnings (losses) as of January 1 7,154,299 7,157,302 Increase (decrease) due to first-time adoption of IFRS 16 - (17,569) Increase (decrease) due to first-time adoption of IFRIC 23 - (13,472) Profit (loss) for the year attributable to owners of the parent (28,366) 84,492 Dividend paid in the year plus provision according to dividends policy (1) 9,299 (56,454) Retained earnings (losses) 7,135,232 7,154,299
(1) At the Shareholders’ meeting held on April 30, 2020, the distribution of a dividend of 30.9% of the distributable net profit as of December 31, 2019, was approved. As a result, an adjustment was made to the Provision for dividends recorded as of December 31, 2019. As of December 31, 2020, ThUS$3,586, the Company recorded a Provision for dividends, which has been calculated according to the Company's dividend policy currently in force.
138 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
As required by Circular No. 1,945 issued by the Chilean Financial Markets Commission (“CMF” in Spanish), dated September 29, 2009, adjustments for first-time application of IFRS recorded with a credit to retained earnings (losses), pending realization are detailed as follows:
2018 2019 2020 Balance to Balance to Balance to Amount to Amount to Concepts be realized be realized be realized be realized be realized a s of a s of a s of in 2019 in 2020 12/31/2018 12/31/2019 12/31/2020 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Property, plant and equipment (1) 637,407 (36,863) 600,544 (36,863) 563,681 Termination benefits (2) 511 (511) - - - Deferred taxes (3) (168,095) 10,366 (157,729) 10,366 (147,363) Total 469,823 (27,008) 442,815 (26,497) 416,318
(1) Property, plant and equipment: the methodology used to quantify the realization of this concept, corresponded to the application of useful lives by type of asset used for depreciation purposes at the time of revaluation determined as of the adoption date. (2) Termination benefits: IFRS require that post-employment benefits provided to employees in the long-term be determined based on the application of an actuarial calculation model, generating differences in respect to the previous methodology that considered current values. This actuarial calculation methodology considers in its variables an average service period of employees of approximately 12 years. (3) Deferred taxes: adjustments in the valuation of assets and liabilities generated by the application of IFRS, have meant the determination of new temporary differences that were recorded against retained earnings (losses) accumulated in equity. Realization of this concept has been determined in the same proportion as the items that originated it.
Retained earnings available for distribution as dividends are detailed as follows:
12/31/2020 12/31/2019 ThUS$ ThUS$ Retained earnings (losses) at the end of the period 7,135,232 7,154,299 Pending adjustments on first-time applications of IFRS (416,318) (442,815) Pending adjustment on revaluation of (1,229,022) (1,299,225) biological assets, net of deferred taxes Retained earnings (losses) available for distribution 5,489,892 5,412,259
28.4. Earnings per share and distributable net profit
28.4.1. Basic and diluted earnings (loss) per share
US$/Per share Earnings (loss) per share 2020 * (0.0113) Earnings (loss) per share 2019 * 0.0338
* Determined considering 2,500,000,000 outstanding shares
139 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
28.4.2. Distributable net profit
In accordance with Circular 1945 issued by the Chilean Financial Markets Commission (“CMF”, in Spanish) dated September 29, 2009 at the meetings held on November 26, 2009 and November 8, 2012, the Board agreed to establish as a general policy that, for the purpose of paying the minimum mandatory dividend of 30% established in article 79 of Law No. 18,046, the net distributable profit shall be determined on the basis of net profits purged of relevant changes in the fair value of unrealized assets and liabilities, which must be reintegrated to the calculation of net profits for the year in which those variations are realized.
Additional dividends shall be determined on the basis of the mentioned criteria in accordance with the agreement adopted at the Shareholders' Meeting in this respect.
Consequently, it was agreed upon that for the purpose of determining the Company's net distributable profits, i.e. net profits to be considered for the calculation of minimum mandatory dividend, the following items will be excluded from income for the year: i) Unrealized income corresponding to changes in fair value of forest plantations. The main adjustments to fair value of forest plantations relate to revaluation for their natural growth. The valuation of these forest assets is regulated by accounting standard IAS 41 (Biological Assets). These results will be incorporated into net profit upon the sale of forest assets or their disposal by any other means. ii) Unrealized income generated from the acquisition of other entities or companies at a value lower than the fair value of net assets (after deducting liabilities) of the acquired entity and, in general, unrealized income produced as a result of the application of paragraphs 34, 39, 42 and 58 of IFRS 3, revised, referring to business combination transactions, mainly related to adjustments derived from the acquisition and takeover process.
These results will also be reintegrated in net profits at the time of their realization. For this purpose, results will be understood as realized to the extent that the entities acquired generate profits after their acquisition, or when those entities or companies are disposed of. iii) The effects of deferred taxes arising from unearned income derived from the application of fair value in forest plantations. These effects derive mainly from changes in fair value, changes in the income tax rate or other concepts
Determination of distributable net profits, which is the basis to quantify dividends to be distributed according to the current dividends policy are detailed below:
140 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Year 2020 2019 ThUS$ ThUS$ Profit (losses) for the year attributable to the owners of the parent (28,366) 84,492
Gain on adjustment to fair value of forest plantations - growth (144,449) (118,155) Higher cost of forest plantations harvested and sold 200,996 197,903 Variation in fair value of forest plantations 56,547 79,748 Deferred taxes associated to the fair value (16,229) (23,104) of forest plantations Distributable net / profit 11,952 141,136 Application of dividends policy 3,586 56,454 Dividend per share (US$/outstanding shares) 0.0014 0.0226
According IFRS, dividends agreed upon in the respective policy are recorded as of year-end.
During the period of twelve months ended December 31, 2020 and December 31, 2019, the dividends paid are detailed as follows:
US$ per share CLP per Dividend Payment date (1) sha re Provisional N° 269 0.0201 14 January 10, 2019 Final N° 270 0.0503 34 May 7, 2019 Provisional N° 271 0.0111 8 September 26, 2019 Final N° 272 0.0067 5.5 May 13, 2020
(1) The current number of shares outstanding amounts to 2,500,000,000 shares (see note 28.1).
Consequently, as of December 31, 2020 and December 31, 2019, total amounts agreed to be paid are detailed as follows:
Year 2020 2019 ThUS$ ThUS$ Dividends, per share, gross 19,340 203,923 Tax on dividends for foreign shareholders (225) (951) Dividends on ordinary shares, net 19,115 202,972
141 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
28.5. Non-controlling interests
The value of the non-controlling interests, included in the Consolidated Statement of Changes in Equity and in the Consolidated Statements of Comprehensive Income, are as follows:
Subsidiaries Profit (loss), Function attributable to Non-controlling Tax payer Country of Interest Name al non-controlling interests No. origin Company Income of currency equity the period interests % ThUS$ ThUS$ ThUS$ ThUS$ Balance as of December 31, 2020 91.440.000-7 Forestal Mininco SpA Chile US$ 0.013 2,645,432 (78,952) (11) 354 70.029.300-9 Cooperativa Agrícola y Forestal El Proboste Ltda Chile US$ 24.077 9,738 2,903 699 2,344 Foreign La Papelera del Plata S.A. Argentina ARS 0.008 124,227 (29,754) (3) 10 Foreign Industria Papelera Uruguaya S.A. Uruguay UYU 0.273 51,198 5,331 15 140 Total 2,830,595 (100,472) 700 2,848
Balance as of December 31, 2019 91.440.000-7 Forestal Mininco SpA Chile US$ 0.013 2,723,532 (92,121) (12) 365 70.029.300-9 Cooperativa Agrícola y Forestal El Proboste Ltda Chile US$ 24.077 7,278 (472) (111) 1,752 Foreign La Papelera del Plata S.A. Argentina ARS 0.009 63,820 (3,166) - 6 Foreign Industria Papelera Uruguaya S.A. Uruguay UYU 0.273 52,027 8,131 22 142 Total 2,846,657 (87,628) (101) 2,265
142 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 29 - REVENUE
Revenue by product types for the period of twelve months ended December 31, 2020 and December 31, 2019, are detailed below:
Year Concepts 2020 2019 ThUS$ ThUS$ Income from domestic market sales 999,421 1,073,845 Income from exports sales 1,686,733 1,794,921 Income from foreign subsidiary exports 868,245 1,047,710 Domestic market income from foreign subsidiaries 1,730,169 1,751,026 Other operating income 2,359 2,775 Total 5,286,927 5,670,277 Operating income attributable to owners of the parent 5,286,691 5,669,935
29.1. Revenue by product types
The opening revenue by product types for the periods of twelve months ended December 31, 2020 and December 31, 2019, are detailed below:
Year Products 2020 2019 ThUS$ ThUS$ Pulp (1) 1,678,964 2,166,510 Tissue and sanitary products 2,067,798 2,093,698 Lumber (2) 687,893 491,590 Cardboards 362,635 374,090 Cardboard boxes 157,827 173,475 Paper packaging 164,619 187,088 Papers (3) 136,745 153,486 Electric energy 28,222 21,229 Others 2,224 9,111 Total 5,286,927 5,670,277
(1) Includes Bleached Eucalyptus Kraft Pulp (BEKP), Bleached Softwood Kraft Pulp (BSKP) and Unbleached Kraft Pulp (UKP). (2) Includes sawn lumber, remanufactured, plywood, pulpable and sawable. (3) Includes multi-ply paper sacks and molded pulp trays (4) Includes papers for corrugating, industrial use, construction, wrapping, printing and writing.
143 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
29.2. Performance obligations
Sale of products: Revenue recognized by the sale of products is recorded when the control is transferred to the customer, that is, when the products are delivered and have been accepted by customers at their facilities.
Prior to the recognition of income, the invoices are generated at the time the products leave the Company’s warehouses and are delivered to the customer.
Invoices for sale of products to customers are generally paid within a maximum period of 90 days, depending on the operating segment; and, additionally, discounts are granted for sales volume, fulfillment of objectives and others, which are recognized net as revenue.
For the discounts that are satisfied during a certain period of time, an estimate is made on each r eporting period date, which is the date of the issuance of the Company's Consolidated Financial Statements, by using the percentage of compliance with the quarterly or monthly sales and thus adjusting the sales. When the probability that the client complies the goals set is high, the sales are recognized net of the discount, and if the probability is low, the income is not affected.
For contracts that allow the customer to return the product, income is recognized to the extent that it is very likely that there will not be a significant reversal in the amount of accumulated revenue recognized.
Therefore, the amount of income recognized is adjusted for the expected returns, which are estimated based on historical data. Under these circumstances, a liability is recognized for the reimbursement that is included in Other non-financial liabilities, current and a right to recover the returned assets included in Inventories.
CMPC reviews its estimate of expected returns on each reporting date (annual) and updates the amounts of the asset and liability accordingly.
144 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 30 - OTHER PROFIT (LOSS)
The effects on results derived from various concepts additional to the operation for the periods of twelve months ended December 31 2020 and 2019, are detailed below:
Year Concepts 2020 2019 ThUS$ ThUS$ Net effect of forest, other impairment losses and insurance recoveries (22,981) (23,817) Donations (12,616) (10,034) Additional tax on capital contributions and foreign bond interests (4,723) (5,441) Consultancies, fines and other foreign taxes (2,854) (1,753) Legal expenses sinister recovery boiler Line 2 - Guaíba (1,546) (5,554) Operational expenses taxes for the acquisition of new companies (866) (3,608) Profit (loss) of sales of non-current assets (49) 243 CMPC Tissue S.A. fine - (15,906) Income from electrical easement sales 1,903 - Others (6,554) (4,414) Total (50,286) (70,284)
NOTE 31 - FINANCE COSTS
The financial costs twelve months ended as of December 31, 2020 and 2019, are as follows:
Year Concepts 2020 2019 ThUS$ ThUS$ Interest on bonds issued (151,909) (138,495) Bank loan interest (27,089) (32,096) Finance lease interest - IAS 17 (2,617) (3,698) Leases interest - IFRS 16 (15,661) (16,867) Other financial interest (3,635) (4,194) Total (200,911) (195,350)
145 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 32 - FOREIGN CURRENCY TRANSLATION DIFFERENCES
32.1. Foreign currency translation differences
The exchange differences generated during the period of twelve months ended December 31, 2020 and December 31, 2019, for the balances of assets and liabilities in currencies other than the functional currency were credited (charged) to income for the year, according to the following detail:
Year Concepts 2020 2019 ThUS$ ThUS$ Assets in currencies other than the functional currency 5,977 (8,286) Liabilities in currencies other than the functional currency (35,244) (515) Total (29,267) (8,801)
32.2. Gain from indexation units
The results for the indexations units generated during the period of twelve months ended December 31, 2020 and December 31, 2019, credited (charged) to income are as follows:
Year Concepts 2020 2019 ThUS$ ThUS$ Assets in currencies other than the functional currency 629 761 Liabilities in currencies other than the functional currency (2,493) (3,182) Hiperinflation effect - IAS 29 (note 2.4.d) 54,740 42,526 Total 52,876 40,105
146 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
32.3. Assets and liabilities in foreign currency
Assets in currency other than the presentation currency affected by changes in exchange rate are detailed as follows:
147 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
12/31/2020 12/31/2019 Type of asset Currency ThUS$ ThUS$ Curre nt a sse ts: Cash and cash equivalents ARS 4,586 4,583 Cash and cash equivalents BRL 77,878 85,459 Cash and cash equivalents CLP 126,589 167,057 Cash and cash equivalents COP 2,055 1,267 Cash and cash equivalents EUR 3,486 482 Cash and cash equivalents GBP 1,693 201 Cash and cash equivalents M XN 10,692 15,508 Cash and cash equivalents PEN 38,689 25,553 Cash and cash equivalents SEK 280 22 Cash and cash equivalents UYU 5,905 4,705 Subtotal cash and cash equivalents 271,853 304,837 Other current financial assets BRL - 243 Subtotal other current financial assets - 243 Otros current non-financial assets ARS 9,431 4,453 Otros current non-financial assets BRL 28,634 48,566 Otros current non-financial assets UF 5 13 Otros current non-financial assets CLP 91,626 53,885 Otros current non-financial assets COP 583 32 Otros current non-financial assets EUR 649 1,173 Otros current non-financial assets M XN 2,852 1,484 Otros current non-financial assets PEN 3,558 2,920 Otros current non-financial assets UYU 1,164 292 Subtotal other current non-financial assets 138,502 112,818 Commercial debtors and other current accounts receivable ARS 51,903 51,768 Commercial debtors and other current accounts receivable BRL 74,796 95,592 Commercial debtors and other current accounts receivable UF 596 195 Commercial debtors and other current accounts receivable CLP 172,885 160,876 Commercial debtors and other current accounts receivable COP 9,939 10,568 Commercial debtors and other current accounts receivable EUR 13,126 12,369 Commercial debtors and other current accounts receivable GBP 6,145 5,563 Commercial debtors and other current accounts receivable M XN 59,631 62,227 Commercial debtors and other current accounts receivable PEN 30,152 37,359 Commercial debtors and other current accounts receivable UYU 8,596 8,984 Subtotal commercial debtors and other current accounts receivable 427,769 445,501 Related entities current accounts receivable CLP 1,717 1,065 Related entities current accounts receivable EUR 1 - Related entities current accounts receivable PEN 16 18 Subtotal related entities current accounts receivable 1,734 1,083 Current inventories ARS 59,175 42,547 Current inventories BRL 52,564 54,587 Current inventories CLP 79,479 69,047 Current inventories COP 16,381 16,713 Current inventories EUR 103 121 Current inventories M XN 67,578 46,449 Current inventories PEN 47,239 45,699 Current inventories UYU 15,175 15,553 Subtotal current inventories 337,694 290,716 Current tax assets ARS 10,533 6,320 Current tax assets BRL 18,384 49,682 Current tax assets CLP 19,540 173,757 Current tax assets COP 3,886 6,661 Current tax assets EUR 1 12 Current tax assets M XN 853 1,096 Current tax assets PEN 130 107 Current tax assets UYU 207 23 Subtotal current tax assets 53,534 237,658 Total current assets 1,231,086 1,392,856
(Continued)
148 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
12/31/2020 12/31/2019 Type of asset Currency ThUS$ ThUS$ Non-current assets: Other non-current financial assets BRL 41,893 - Other non-current financial assets UF 26,810 13,667 Subtotal other non-current financial assets 68,703 13,667 Other non-current non-financial assets ARS 2,269 329 Other non-current non-financial assets BRL 42,825 53,099 Other non-current non-financial assets UF 151 - Other non-current non-financial assets CLP 2,313 2,596 Other non-current non-financial assets M XN 1,268 1,054 Other non-current non-financial assets PEN 175 235 Subtotal other non-current non-financial assets 49,001 57,313 Non-current accounts receivable ARS 1 59 Non-current accounts receivable BRL 9,523 37,726 Non-current accounts receivable UF 255 150 Non-current accounts receivable CLP 117 124 Subtotal non-current accounts receivable 9,896 38,059 Investment accounted for using the equity method EUR 1,322 376 Investment accounted for using the equity method CLP 149 126 Subtotal investment accounted for using the equity method 1,471 502 Intangible assets other than goodwill ARS 100 35 Intangible assets other than goodwill BRL 71,829 92,464 Intangible assets other than goodwill CLP 2,061 2,262 Intangible assets other than goodwill COP 16 23 Intangible assets other than goodwill M XN 144 190 Intangible assets other than goodwill PEN 2,078 2,340 Intangible assets other than goodwill UYU 125 - Subtotal intangible assets other than goodwill 76,353 97,314 Goodwill ARS 699 982 Goodwill BRL 133,811 176,164 Goodwill M XN 471 498 Goodwill PEN 1,136 1,241 Subtotal goodwill 136,117 178,885 Property, plant and equipment ARS 220,205 218,193 Property, plant and equipment BRL 255,609 331,200 Property, plant and equipment CLP 244,587 230,946 Property, plant and equipment COP 53,788 57,997 Property, plant and equipment M XN 217,754 226,859 Property, plant and equipment PEN 205,902 227,569 Property, plant and equipment UYU 28,863 33,271 Subtotal property, plant and equipment 1,226,708 1,326,035 Right of use assets ARS 7,511 9,926 Right of use assets BRL 8,169 7,402 Right of use assets CLP 13,698 18,384 Right of use assets COP 3,787 5,282 Right of use assets M XN 28,672 28,744 Right of use assets PEN 8,378 18,054 Right of use assets UYU 1,121 1,981 Subtotal right of use assets 71,336 89,773 Non-current tax assets BRL 14,996 940 Subtotal non-current tax assets 14,996 940 Deferred tax assets ARS 1,368 1,677 Deferred tax assets BRL 727 - Deferred tax assets CLP 38,916 - Deferred tax assets COP 9,778 10,360 Deferred tax assets M XN 8,431 10,455 Deferred tax assets UYU 3,005 2,722 Subtotal deferred tax assets 62,225 25,214 Total non-current assets 1,716,806 1,827,702
149 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Liabilities in currencies other than the presentation currency, affected by changes in exchange rate, presented at undiscounted values, are detailed as follows:
December 31, 2020 December 31, 2019 91 days up to 91 days up to Type of liability Currency Up to 90 days Total Up to 90 days Total 1 year 1 year ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Current liabilities: Other current financial liabilities ARS 27,368 - 27,368 - - - Other current financial liabilities BRL 20,099 98,152 118,251 25,232 63,842 89,074 Other current financial liabilities UF 9,059 42,417 51,476 11,827 36,113 47,940 Other current financial liabilities CLP 21 62 83 565 58 623 Other current financial liabilities COP 3 8 11 6 11 17 Other current financial liabilities EUR 510 1,322 1,832 3 37 40 Other current financial liabilities GBP 126 301 427 8 28 36 Other current financial liabilities PEN 2,863 10,298 13,161 11,608 11,226 22,834 Subtotal other current liabilities 60,049 152,560 212,609 49,249 111,315 160,564 Liabilities for current leases US$ 3,005 8,970 Liabilities for current leases ARS 113 340 453 115 344 459 Liabilities for current leases BRL 3,321 9,584 12,905 2,843 8,528 11,371 Liabilities for current leases CLP 881 2,603 3,484 1,023 3,070 4,093 Liabilities for current leases UF 826 2,436 3,262 1,524 4,572 6,096 Liabilities for current leases COP 288 773 1,061 285 854 1,139 Liabilities for current leases M XN 1,312 3,493 4,805 1,050 3,150 4,200 Liabilities for current leases PEN 389 1,166 1,555 121 363 484 Liabilities for current leases UYU 57 170 227 53 160 213 Subtotal liabilities for current leases 7,187 20,565 27,752 7,014 21,041 28,055 Trade and other accounts payable US$ 200,881 4,440 Trade and other accounts payable ARS 35,008 - 35,008 36,369 - 36,369 Trade and other accounts payable BRL 133,379 7,700 141,079 150,793 4,921 155,714 Trade and other accounts payable CAD 28 - 28 56 - 56 Trade and other accounts payable CHF 4 - 4 109 - 109 Trade and other accounts payable UF 9,790 - 9,790 4,634 - 4,634 Trade and other accounts payable CLP 240,909 2,448 243,357 263,076 1,730 264,806 Trade and other accounts payable COP 9,931 - 9,931 8,838 - 8,838 Trade and other accounts payable EUR 20,104 28 20,132 16,648 687 17,335 Trade and other accounts payable GBP 1,039 - 1,039 506 - 506 Trade and other accounts payable JPY 54 - 54 37 - 37 Trade and other accounts payable M XN 35,182 15 35,197 34,475 - 34,475 Trade and other accounts payable PEN 30,104 75 30,179 18,332 136 18,468 Trade and other accounts payable SEK 196 - 196 105 - 105 Trade and other accounts payable UTA - - - 15,906 - 15,906 Trade and other accounts payable UYU 5,033 - 5,033 4,251 13 4,264 Subtotal trade and other accounts payable 520,761 10,266 531,027 554,135 7,487 561,622
150 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(Continued)
December 31, 2020 December 31, 2019 91 days up to 91 days up to Type of liability Currency Up to 90 days Total Up to 90 days Total 1 year 1 year ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Current liabilities: Accounts payable to current entities related CLP 5,129 - 5,129 1,005 - 1,005 Accounts payable to current entities related EUR 1 - 1 - - - Accounts payable to current entities related PEN 10 - 10 - - - Subtotal accounts payable to current entities related 5,140 - 5,140 1,005 - 1,005 Other short term provisions ARS - 1,588 1,588 - 1,815 1,815 Other short term provisions CLP - 240 240 - 2,650 2,650 Subtotal other short term provisions - 1,828 1,828 - 4,465 4,465 Liabilities for current taxes US$ 16,597 Liabilities for current taxes ARS - 633 633 - 548 548 Liabilities for current taxes BRL - 2,372 2,372 - 2,174 2,174 Liabilities for current taxes CLP - 17,788 17,788 - 18,369 18,369 Liabilities for current taxes M XN - 360 360 - 1,312 1,312 Liabilities for current taxes PEN - 3,930 3,930 - 1,301 1,301 Liabilities for current taxes UYU - - - - 411 411 Subtotal liabilities for current taxes - 25,083 25,083 - 24,115 24,115 Current employee benefits provisions US$ 550 Current employee benefits provisions ARS - 2,442 2,442 - 2,951 2,951 Current employee benefits provisions BRL - 13,498 13,498 - 14,941 14,941 Current employee benefits provisions CLP - 53,239 53,239 - 48,268 48,268 Current employee benefits provisions COP - 987 987 - 947 947 Current employee benefits provisions M XN - 1,362 1,362 - 1,467 1,467 Current employee benefits provisions PEN - 6,891 6,891 - 5,809 5,809 Current employee benefits provisions UYU - 2,845 2,845 - 1,927 1,927 Subtotal current employee benefits provisions - 81,264 81,264 - 76,310 76,310 Other current non-financial liabilities US$ - 19,440 Other current non-financial liabilities ARS - 2,459 2,459 - 2,418 2,418 Other current non-financial liabilities BRL - 8,281 8,281 - 10,531 10,531 Other current non-financial liabilities CLP - 4,650 4,650 - 2,815 2,815 Other current non-financial liabilities UF - 4,040 4,040 - 36 36 Other current non-financial liabilities COP - 93 93 - 78 78 Other current non-financial liabilities EUR - - - - 362 362 Other current non-financial liabilities M XN - 2,201 2,201 - 2,591 2,591 Other current non-financial liabilities PEN - 2,455 2,455 - 1,950 1,950 Other current non-financial liabilities UYU - 29 29 - 39 39 Subtotal other current non-financial liabilities - 24,208 24,208 - 20,820 20,820 Total current liabilities 593,137 315,774 908,911 611,403 265,553 876,956
151 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(Continued)
December 31, 2020 December 31, 2019 More than 1 More than 3 More than 1 More than 3 More than 5 More than 5 Type of liability Currency & up to 3 & up to 5 Total & up to 3 & up to 5 Total years years years years years years ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Non-current liabilities: Other non-current financial liabilities US$ 1,327,189 926,821 1,199,900 Other non-current financial liabilities BRL 77,293 2,759 - 80,052 164,652 9,095 13 173,760 Other non-current financial liabilities UF 53,153 126,753 967,259 1,147,165 72,177 49,151 990,330 1,111,658 Other non-current financial liabilities CLP 147 - - 147 170 - - 170 Other non-current financial liabilities COP 2 - - 2 16 - - 16 Other non-current financial liabilities M XN - - - - - 6 - 6 Other non-current financial liabilities PEN 28,852 15,076 441 44,369 27,244 34,106 - 61,350 Subtotal other non-current financial liabilities 159,447 144,588 967,700 1,271,735 264,259 92,358 990,343 1,346,960 Liabilities for non-current leases US$ 23,150 20,169 10,645 Liabilities for non-current leases ARS 908 296 196 1,400 914 296 196 1,406 Liabilities for non-current leases BRL 23,919 18,389 19,155 61,463 20,401 15,714 9,027 45,142 Liabilities for non-current leases CLP 6,442 5,734 4,348 16,524 7,513 5,933 6,128 19,574 Liabilities for non-current leases UF 5,943 5,837 11,202 22,982 11,783 9,117 16,216 37,116 Liabilities for non-current leases COP 1,496 1,310 2,549 5,355 1,753 1,615 1,976 5,344 Liabilities for non-current leases M XN 9,866 8,911 15,415 34,192 8,010 7,364 28,507 43,881 Liabilities for non-current leases PEN 3,065 2,912 5,918 11,895 902 750 485 2,137 Liabilities for non-current leases UYU 405 391 251 1,047 408 395 283 1,086 Subtotal liabilities for non-current leases 52,044 43,780 59,034 154,858 51,684 41,184 62,818 155,686 Other non-current provisions ARS 71 - - 71 75 - - 75 Other non-current provisions BRL 13,670 - - 13,670 8,530 - - 8,530 Other non-current provisions CLP 2,213 - - 2,213 - - - - Subtotal other non-current provisions 15,954 - - 15,954 8,605 - - 8,605 Deferred tax liabilities US$ 1,576,640 Deferred tax liabilities ARS - - 56 56 - - 88 88 Deferred tax liabilities BRL ------6,131 6,131 Deferred tax liabilities CLP ------24,484 24,484 Deferred tax liabilities PEN - - 17,575 17,575 - - 16,790 16,790 Subtotal deferred tax liabilities - - 17,631 17,631 - - 47,493 47,493 Non-current employee benefits provisions US$ 534 Non-current employee benefits provisions ARS ------Non-current employee benefits provisions BRL 3,457 3,457 27,653 34,567 4,839 4,839 38,712 48,390 Non-current employee benefits provisions CLP 7,458 7,458 59,666 74,582 6,479 6,479 51,830 64,788 Non-current employee benefits provisions M XN 624 - - 624 401 - - 401 Non-current employee benefits provisions UYU 12 - - 12 3 - - 3 Subtotal non-current employee benefits provisions 11,551 10,915 87,319 109,785 11,722 11,318 90,542 113,582 Other non-current non-financial liabilities US$ 1,089 - - Other non-current non-financial liabilities BRL 45,790 - - 45,790 5,484 - - 5,484 Other non-current non-financial liabilities UF - - - - 923 - - 923 Subtotal other non-current non-financial liabilities 45,790 - - 45,790 6,407 - - 6,407 Total non-current liabilities 284,786 199,283 1,131,684 1,615,753 342,677 144,860 1,191,196 1,678,733
152 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 33 - INCOME TAX EXPENSE
The Income Tax expense during the period of twelve months ended December 31, 2020 and December 31, 2019, is as follows:
Year Income (Expense) tax 2020 2019 ThUS$ ThUS$ Income (Expense) for current taxes Current domestic tax (41,839) (31,372) Prior year adjustments due to current domestic taxes (1,920) (12,873) Current foreign tax (72,644) (68,815) Previous years foreign current tax adjustments (263) 74 Total current taxes (116,666) (112,986) Income (Expense) for deferred taxes National deferred taxes related to the creation and reversal of temporary 127,611 (16,213) differences Foreign deferred taxes related to the creation and reversal of temporary (90,267) (7,672) differences Total deferred taxes 37,344 (23,885) Income (Expense) tax (79,322) (136,871)
As of December 31, 2018 the Chilean companies calculated and accounted for the income tax provision on the basis of taxable net income using a rate of 27% commercial, in accordance with Law 20,780, published in the Official Gazette on September 29, 2014.
The reconciliation of the Income Tax expense using the legal rate with the tax expense using the effective rate, during the period of twelve months ended December 31, 2020 and December 31, 2019, is as follows:
Year Conciliation 2020 2019 ThUS$ ThUS$ Profit (loss) before taxes 51,656 221,262 Taxes results using the legal rate in Chile (13,947) (59,741) Tax effect of different rates abroad (1,053) (15,431) Tax effect for difference of functional financial and tax currency (125,889) (23,315) Tax effect for exchange difference of investments abroad 58,947 (33,673) Other tax effects due to conciliation between accounting profit and tax 2,620 (4,711) expense Tax charge using the effective rate (79,322) (136,871)
153 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The reconciliation between the local tax rate and the effective rate during the period of twelve months ended December 31, 2020 and December 31, 2019, is as follows:
Year Concepts 2020 2019 % % Taxable income using the legal rate in Chile 27.00 27.00 Tax effect of different rates abroad 2.04 6.97 Tax effect for difference of functional financial and tax currency 243.71 10.54 Tax effect for exchange difference of investments abroad (114.12) 15.22 Other tax effects due to conciliation between accounting profit and tax exp (5.07) 2.13 Average effective tax rate 153.56 61.86
The tax results depend on the legal tax rate applicable in Chile and the corresponding foreign tax rates applicable to each of the subsidiaries. Such rates are applied to the pre-tax income of each of the subsidiaries forming the Group. In addition the following effects are present: i) The tax effect for using different functional currency for tax and financial purposes corresponds mainly to the determination of deferred taxes in foreign subsidiaries (CMPC Celulose Riograndense Ltda.). This effect amounts to ThUS$125,889 as of December 31, 2020, (charge as a result of ThUS$23,315 as of December 31, 2019) and has been recorded in the line item “Income tax expense”. Such effect is derived mainly from the foreign exchange rate fluctuations to dollar of property, plant and equipment, biological assets and tax losses ii) The tax effect due to the foreign exchange rates of the investments corresponds mainly to the determination of current taxes in Chile (CMPC Tissue S.A.), due to the fact that the functional currency of the Company is Chilean pesos and the tax regulations in Chile indicate that the foreign investments cost should be updated based on the variation of the dollar. For the period of twelve months ended December 31, 2020, such impact amounts to ThUS$58,947 (charge as a result of ThUS$33,673 as of December 31, 2019) that has been recorded in the consolidated statement of comprehensive income at the line item “Income tax expense”. iii) Other tax effects that derive from reconciliation of the financial income and the tax expenses correspond to minor differences between accounting and tax policies.
154 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Income tax expense paid as of December 31, 2020 and December 31, 2019, is as follows:
Year Income taxes paid 2020 2019 ThUS$ ThUS$ Chile 60,933 225,275 Brazil 42,593 108,727 Peru 6,780 2,727 Mexico 1,416 1,004 United States 2,086 941 Argentina 235 750 Colombia 219 565 Ecuador - 507 Uruguay 691 - Income taxes paid 114,953 340,496
The Expense for other taxes other than income taxes during the period of twelve months ended December 31, 2020 and December 31, 2019, is as follows:
Year Concepts 2020 2019 ThUS$ ThUS$ Trademarks 6,649 6,812 Customs duties 4,025 4,060 Tax financial transactions 2,351 3,816 Property tax expense 14,161 12,028 Payroll taxes 8,323 7,850 Green taxes 3,637 3,596 Other taxes 10,944 9,706 Total taxes other than income tax expenses 50,090 47,868
155 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 34 - EXPENSES BY NATURE
The following detail corresponds to the Company's main costs and operating and administrative expenses for period of twelve months ended December 31, 2020 and December 31, 2019:
Year Concepts 2020 2019 ThUS$ ThUS$ Lumber, chemicals and energy 2,673,550 2,805,023 Wages and salaries 396,763 410,663 Social security contributions 36,771 39,583 Other short-term employee benefits 81,825 97,162 Termination benefits expenses (severance indemnities) 5,587 6,577 Other long-term employee benefits 2,270 1,713 Other employee expenses 36,266 35,527 Employee payroll and other 559,482 591,225 Depreciation expense 542,891 524,675 Amortization expense 7,399 4,481 Depreciation and amortization 550,290 529,156 Administrative and selling expenses 397,882 377,942 Research and development expenses 4,999 5,983 Administrative and selling expenses 402,881 383,925 Variable selling expenses 602,491 638,048 Maintenance expenses 351,559 380,898 Other miscellaneous operating expenses 23,059 25,259 Other expenses by nature 977,109 1,044,205 Total expenses by nature 5,163,312 5,353,534
156 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 35 – COMMITMENTS
There are future cash flow commitments from investment activities corresponding to projects approved by the Company. Currently, CMPC has ongoing projects, of which future disbursements are estimated for an approximate amount of ThUS$274,622 to complete them. As of December 31, 2020, the following committed investment flows are detailed
Projects ThUS$ Forests 29,275 Real Estate 1,018 Expansion 51,400 Reposition 14,340 Efficiency 17,827 Environment 27,612 Other investments 133,150 Total 274,622
The amounts are expressed at the current value of disbursements projected for 2020 and subsequent periods.
Committed investment flows relate to projects intended to increase the production capacity of the industrial plants and to maintain and improve environmental performance.
Commitments relevant to the end of the period are recorded, highlighting the investment commitments of property, plant and equipment.
157 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 36 - SHAREHOLDER AND TRANSACTIONS WITH RELATED PARTIES
36.1. Identification of main shareholders
The Company is controlled by Minera Valparaíso S.A. through its subsidiary Forestal Cominco S.A. and Forestal Constructora y Comercial del Pacífico Sur S.A. and other legal entities and individuals related to the Matte Group. Both Minera Valparaíso S.A. and Forestal Constructora y Comercial del Pacífico Sur S.A. are public companies registered in the Chilean Financial Markets Commission (“CMF” in Spanish) under numbers 0098 and 0059, respectively. Control is exercised through having a majority of outstanding shares and consequently electing a majority of the Directors of the Board of Empresas CMPC S.A.
The main share interests of the controlling entities of CMPC S.A. as of December 31, 2020, are detailed as follows:
Taxpayer Number of Shareholder (1) % interest No. shares 79.621.850-9 Forestal Cominco S.A. 487,492,057 19.50% 91.553.000-1 Forestal Constructora y Comercial del Pacífico Sur S.A. 478,715,048 19.15% 95.980.000-6 Forestal O'Higgins S.A. 229,954,793 9.20% 87.014.900-K Forestal Bureo S.A. 106,457,955 4.26% 80.231.700-K Coindustria Ltda. 46,575,370 1.86% 77.868.100-5 Forestal y Minera Ebro Ltda. 14,408,280 0.58% 77.868.050-5 Forestal y Minera Volga Ltda. 8,823,060 0.35% 81.280.300-K Viecal S.A. 6,501,641 0.26% 87.014.500-4 Forestal Peumo S.A. 5,141,294 0.21% 87.014.600-0 Forestal Calle Las Agustinas S.A. 3,863,334 0.15% 94.645.000-6 Inmobiliaria Ñague S.A. 2,504,340 0.10% 87.014.700-7 Forestal Choapa S.A. 2,332,209 0.09% 87.014.800-3 Agrícola e Inmobiliaria Rapel Ltda. 617,993 0.02% Others 2,283,264 0.10% Total 1,395,670,638 55.83%
(1) Shareholders holding their shares in custody, either through a stockbroker or other authorized entity, are not listed.
158 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
36.2. Twelve main shareholders
The list with the twelve main shareholders of Empresas CMPC S.A. as of December 31, 2020, is detailed as follow:
December 31, 2020 Taxpayer Number of Shareholder % interest No. shares 79.621.850-9 Forestal Cominco S.A. 487,492,057 19.50% 91.553.000-1 Forestal Constructora y Comercial del Pacífico Sur S.A. 478,715,048 19.15% 95.980.000-6 Forestal O'Higgins S.A. 229,954,793 9.20% 97.004.000-5 Banco de Chile, on behalf of third parties 188,718,279 7.55% 87.014.900-K Forestal Bureo S.A. 106,457,955 4.26% 33.003.217-0 Banco Santander - JP Morgan 91,950,249 3.68% 97.023.000-9 Rentas Santa Marta Ltda. 41,531,124 1.66% 98.000.100-8 A.F.P. Habitat S.A., for pension funds 78,776,553 3.15% 76.265.736-8 A.F.P. Provida S.A., for pension funds 65,818,845 2.63% 76.240.079-0 A.F.P. Cuprum S.A., for pension funds 60,342,268 2.41% 98.000.000-1 A.F.P. Capital S.A., for pension funds 51,752,292 2.07% 80.231.700-K Coindustria Ltda. 46,575,370 1.86% Total 1,928,084,833 77.12%
As of December 31, 2019, the company's twelve main shareholders are detailed as follow:
December 31, 2019 Taxpayer Number of Shareholder % interest No. shares 79.621.850-9 Forestal Cominco S.A. 487,492,057 19.50% 91.553.000-1 Forestal Constructora y Comercial del Pacífico Sur S.A. 478,715,048 19.15% 95.980.000-6 Forestal O'Higgins S.A. 229,954,793 9.20% 97.004.000-5 Banco de Chile, on behalf of third parties 137,733,654 5.51% 87.014.900-K Forestal Bureo S.A. 106,457,955 4.26% 97.023.000-9 Banco Itaú Corpbanca, on behalf of foreign investors 97,854,158 3.91% 33.003.217-0 Banco Santander - JP Morgan 93,805,017 3.75% 76.265.736-8 A.F.P. Provida S.A., for pension funds 66,400,041 2.66% 98.000.100-8 A.F.P. Habitat S.A., for pension funds 60,849,777 2.43% 98.000.000-1 A.F.P. Capital S.A., for pension funds 47,182,753 1.89% 80.231.700-K Coindustria Ltda. 46,575,370 1.86% 86.911.800-1 Rentas Santa Marta Limitada 41,531,124 1.66% Total 1,894,551,747 75.78%
As of December 31, 2020, the Company had a total of 20,362 shareholders (21,390 as of December 31, 2019).
159 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
36.3. Commercial transactions with related parties
Significant transactions with related parties as of December 31, 2020 and 2019, are as follows:
Transaction amount Description of Nature of the Period Period Description of other information Related part Nature of the Country of transactions transactions Name ended as of ended as of on transactions with related taxpayer No. relationship origin with related with related 12/31/2020 12/31/2019 parties parties parties ThUS$ ThUS$ Effects on income: 12/2020 Financial 97.080.000-K Banco BICE Corporate group Chile Commissions 369 339 expenses for ThUS$ 369.; 12/2019 transaction expenses of ThUS$ 339 Effects on income: 12/2020 Insurance Commercial 96.656.410-5 BICE Vida Compañía de Seguros S.A. Corporate group Chile 236 345 expenses for ThUS$ 236.; 12/2019 purchase transaction expenses of ThUS$ 345 Effects on income: 12/2020 income Commercial 96.848.750-7 Aislantes Volcán S.A. Corporate group Chile Sale of products 220 426 for ThUS$ 102.; 12/2019 income for transaction ThUS$ 158 Effects on income: 12/2020 income Commercial 90.209.000-2 Compañía Industrial El Volcán S.A. Corporate group Chile Sale of products 4,511 4,015 for ThUS$ 1643.; 12/2019 income transaction for ThUS$ 1,679 Effects on income: 12/2020 Commercial 77.524.300-7 Fibrocementos Volcán Ltda. Corporate group Chile Sale of products 946 1,043 expenses for ThUS$ 46.; 12/2019 transaction income for ThUS$ 176 Effects on income: 12/2020 Easement Commercial 96.505.760-9 Colbún S.A. Corporate group Chile 1,365 978 expenses for ThUS$ 1,365.; contract transaction 12/2019 expenses for ThUS$ 978 Effects on income: 12/2020 Purchase of Commercial 41,235 37,505 expenses for ThUS$ 41,235.; energy transaction 12/2019 expenses for ThUS$ 37,505 Effects on income: 12/2020 income Commercial Sale of energy 205 513 for ThUS$ 109.; 12/2019 income for transaction ThUS$ 118 Effects on income: 12/2020 income Commercial 80.397.900-6 Solcrom S.A. Corporate group Chile Sale of products 1,445 621 for ThUS$ 856.; 12/2019 income for transaction ThUS$ 373
160 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
(Continued)
Transaction amount Description of Nature of the Period Period Description of other information Related part Nature of the Country of transactions transactions Name ended as of ended as of on transactions with related taxpayer No. relationship origin with related with related 12/31/2020 12/31/2019 parties parties parties ThUS$ ThUS$ Effects on income: 12/2020 Controlled by member Insurance Commercial 99.301.000-6 Seguros de Vida Security Previsión S.A. Chile 644 1,334 expenses for ThUS$ 644.; 12/2019 of the Board purchase transaction expenses for ThUS$ 1,334 Effects on income: 12/2020 income Common shareholders Commercial 78.023.030-4 Sofruco Alimentos Ltda. Chile Sale of products 981 232 for ThUS$ 278.; 12/2019 income for in the parent transaction ThUS$ 90 Effects on income: 12/2020 Empresa Nacional de Common shareholders Purchase of Commercial 92.580.000-7 Chile 2,280 2,042 expenses for ThUS$ 2,280.; Telecomunicaciones S.A. in the parent services transaction 12/2019 expenses for ThUS$ 2,042 Effects on income: 12/2020 Common shareholders Purchase of Commercial 96.806.980-2 Entel PCS Telecomunicaciones S.A. Chile 871 1,061 expenses for ThUS$ 871.; 12/2019 in the parent services transaction expenses for ThUS$ 1,061 Purchase of Commercial Effects on income: 12/2020 Foreign CMPC Europe GmbH & Co. KG Joint venture Germany 2,088 - services transaction expenses for ThUS$ 2,088.
161 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
For disclosure purposes, all transactions which annual total amount exceeds ThUS$300 are considered significant.
Transactions with Banco BICE are mainly to commissions related to letters of credit and current bank accounts, which are made at market values.
Transactions with BICE Vida Compañía de Seguros S.A. are mainly payments for life and health insurance of personnel, made under market conditions.
Transactions with Colbún S.A. and Colbún Transmisión S.A., correspond mainly to electric energy purchase contract defined by the CEN.
Transactions with Empresa Nacional de Telecomunicaciones S.A. and Entel PCS Telecomunicaciones S.A. are related mainly to landline and mobile telephony services, data transfer, perimeter security and electronic commerce. There are contracts for these services that consider fixed values and variable rates based on volume.
Transactions with Seguros de Vida Security Previsión S.A. are related to contracts for health insurance for the personnel of Empresas CMPC S.A. and subsidiaries, which billing includes monthly maturities.
Transactions and balances receivable from Compañía Industrial El Volcán S.A., Aislantes Volcán S.A., Fibrocementos Volcán S.A., Sofruco Alimentos Ltda., Solcrom S.A. correspond to sales of the Company's products, which were carried out under market conditions.
Transactions with CMPC Europe GmbH & Co. KG correspond to the collections made by the joint venture as the Company's sales agent in the European market. These services are performed under market conditions.
36.4. Remunerations and fees of the Board and Directors Committee and remunerations of key executives.
As of December 31, 2020, Board fees amounted to ThUS$756 (ThUS$3,375 as of December 31, 2019) and those of the Directors Committee amounted to ThUS75 for the period of twelve months ended December 31, 2020 (ThUS$399 as of December 31, 2019).
Key executives have an incentive plan consisting of a variable annual bonus that depends on profits and other indicators during the course of the year, based on the achievement of strategic objectives and compliance of business profitability goals. Total gross remuneration received by the executives of CMPC, which include these incentives, amounted to ThUS$6,687 as of December 31, 2020 (ThUS$5,835 for the year ended December 31, 2019).
162 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 37 – CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of Empresas CMPC S.A. include the subsidiaries described in note 1.
Follow is a summary of the information of the most significant subsidiaries, related with the total of the individual financial statements of each one of them:
12/31/2020 12/31/2019 Assets and liabilities of significant subsidiaries Asse ts Liabilities Asse ts Liabilities ThUS$ ThUS$ ThUS$ ThUS$ Current 4,257,146 2,222,559 5,211,538 3,259,842 Non-current 20,110,835 7,617,887 20,882,552 7,648,987 Total 24,367,981 9,840,446 26,094,090 10,908,829
Year Revenue and expenses of significant subsidiari 2020 2019 ThUS$ ThUS$ Revenue 3,959,299 4,685,246 Other income statement items (3,877,845) (4,345,205) Profit (losse s) 81,454 340,041
The individual information of the most significant subsidiaries by segment, included in the scope of consolidation, expressed in thousands of dollars, is as follows:
Forestal Mininco SpA CMPC Pulp SpA CMPC Tissue S.A. Detail 12/31/2020 12/31/2019 12/31/2020 12/31/2019 12/31/2020 12/31/2019 Country of incorporation Chile Chile Chile Chile Chile Chile Functional currency US$ US$ US$ US$ CLP CLP Percentage of participation 99.9866% 99.9866% 100% 100% 100% 100% Total assets 3,396,532 3,451,750 4,923,266 6,001,761 1,703,999 1,684,732 Current assets 244,139 254,249 761,714 1,636,836 282,722 245,523 Non-current asses 3,152,393 3,197,501 4,161,552 4,364,925 1,421,277 1,439,209 Total liabilities 751,101 728,218 2,317,538 3,102,423 647,835 667,950 Current liabilities 217,970 176,162 888,714 875,164 415,810 419,378 Non-current liabilities 533,131 552,056 1,428,824 2,227,259 232,025 248,572 Revenue 377,681 433,447 1,949,329 2,332,065 478,630 514,607 Profit (losses) (78,952) (92,121) (67,720) 189,193 145,965 (21,113)
CMPC Celulose Cartulinas CMPC SpA Inversiones CMPC S.A. Detail Riograndense Ltda. 31/12/2020 31/12/2019 31/12/2020 31/12/2019 31/12/2020 31/12/2019 Country of incorporation Chile Chile Chile Chile Brazil Brazil Functional currency US$ US$ US$ US$ US$ US$ Percentage of participation 100% 100% 100% 100% 100% 100% Total assets 768,003 740,838 9,707,633 10,097,970 3,868,548 4,117,039 Current assets 358,974 313,568 2,101,165 2,019,454 508,432 741,908 Non-current asses 409,029 427,270 7,606,468 8,078,516 3,360,116 3,375,131 Total liabilities 150,677 144,438 4,550,752 4,662,833 1,422,543 1,602,967 Current liabilities 65,213 61,598 310,470 960,954 324,382 766,586 Non-current liabilities 85,464 82,840 4,240,282 3,701,879 1,098,161 836,381 Revenue 401,680 381,529 328 373 751,651 1,023,225 Profit (losses) 21,490 9,155 80,278 67,789 (19,607) 187,138
163 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
The accounts receivable and payable of Empresas CMPC S.A. with the most significant subsidiaries are detailed as follow:
Accounts receivable
Related Account Pending balance Explanation of the nature Nature of the Country Transaction terms party Related party name receivable 12/31/2020 12/31/2019 Currency of the fixed remuneration relationship of origin with related party taxpayer No. detail ThUS$ ThUS$ to pay off a transaction Curre nt a sse ts: 91.440.000-7 Forestal Mininco SpA Subsidiary Chile Services - 94 CLP 30 days Monetary 96.532.330-9 CMPC Pulp SpA Subsidiary Chile Services 3 356 CLP 30 days Monetary 96.529.310-8 CMPC Tissue S.A. Subsidiary Chile Services 1,471 5,208 CLP 30 days Monetary 96.731.890-6 Cartulinas CMPC SpA Subsidiary Chile Services 19 113 CLP 30 days Monetary 96.596.540-8 Inversiones CMPC S.A. Subsidiary Chile Services - 439 CLP 30 days Monetary CMPC Celulose Foreign Subsidiary Brazil Services 2 17 US$ 30 days Monetary Riograndense Ltda. 96.596.540-8 Inversiones CMPC S.A. Subsidiary Chile Loans 2,343 - US$ 30/360 days Monetary
Accounts payable
Related Account Pending balance Explanation of the nature Nature of the Country Transaction terms party Related party name receivable 12/31/2020 12/31/2019 Currency of the fixed remuneration relationship of origin with related party taxpayer No. detail ThUS$ ThUS$ to pay off a transaction Current liabilities: 91.440.000-7 Forestal Mininco SpA Subsidiary Chile Refunds 9 - US$ 30 days Monetary 96.529.310-8 CMPC Tissue S.A. Subsidiary Chile Refunds - 64 CLP 30 days Monetary 96.596.540-8 Inversiones CMPC S.A. Subsidiary Chile Loans - 189,606 US$ 30/360 days Monetary
Non-current liabilities: 96.596.540-8 Inversiones CMPC S.A. Subsidiary Chile Loans 117,932 117,932 US$ More than 360 days Monetary
The main transactions of Empresas CMPC S.A. with the most significant subsidiaries are the following:
Transaction amount Description of Nature of the Related Nature of Period Year ended Explanation of other information Country transactions transactions party Name the ended as of a s of about transactions with related of origin with related with related taxpayer No. relationship 12/31/2020 12/31/2019 parties parties parties ThUS$ ThUS$ Sale of Commercial Effects on income: 12/2019 income 91.440.000-7 Forestal Mininco SpA Subsidiary Chile - 3 services transaction for ThUS$ 1 Effects on income: 12/2020 income Purchase of Commercial 89 133 for ThUS$ 89.; 12/2019 expenses of services transaction ThUS$ 133 Sale of Commercial Effects on income: 12/2019 income 96.532.330-9 CMPC Pulp SpA Subsidiary Chile 2 213 services transaction for ThUS$ 8 Effects on income: 12/2020 income Commercial Leases 33 110 for ThUS$ 33.; 12/2019 income for transaction ThUS$ 110 Effects on income: 12/2020 income Sale of Commercial 96.529.310-8 CMPC Tissue S.A. Subsidiary Chile 11,012 13,269 for ThUS$ 423.; 12/2019 income for services transaction ThUS$ 509 Effects on income: 12/2020 income Commercial Leases 186 201 for ThUS$ 186.; 12/2019 income for transaction ThUS$ 201 Effects on income: 12/2020 Purchase of Commercial 328 54 expenses for ThUS$ 328.; 12/2019 services transaction expenses of ThUS$ 54 Sale of Commercial Effects on income: 12/2019 income 96.731.890-6 Cartulinas CMPC SpA Subsidiary Chile 3 11 services transaction for ThUS$ 1 Effects on income: 12/2020 income Commercial Leases 88 95 for ThUS$ 88.; 12/2019 income for transaction ThUS$ 95 Effects on income: 12/2020 Loans and Financial 96.596.540-8 Inversiones CMPC S.A. Subsidiary Chile 2,323 307,539 expenses for ThUS$ 6226.; 12/2019 interests transaction expenses of ThUS$ 12.529
Effects on income: 12/2020 income Sale of Commercial 350 200 for ThUS$ 13.; 12/2019 income for services transaction ThUS$ 8
164 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
NOTE 38 - ENVIROMENT
The long-term policy of CMPC is the sustainable development of its forestry and industrial activities, in harmony with the environment. Most of the subsidiaries and factories have obtained their international ISO 9,001 and 14,001 quality standard certification.
Annually, important investments are made in biological assets associated with afforestation and reforestation of forests, which allow capturing and storing CO₂. Sustainable forest management of plantations is certified through CERTFOR-PEFC ™ and FSC®.
The investments of CMPC in property, plant and equipment include environmental improvements that contribute to mitigate the environmental impact of its operations. The projects, the aim of which is primarily environmental involved disbursements in the period of ThUS$14,755. And they have been financed through green bonds, which have an external evaluation and are aligned with the "Green Bond Principles" of the Capital Market Association (ICMA) and with the “Green Loan Principles” of the Loan Market Association (LMA) and the Asia Pacific Loan Market Association (APLMA).
The main disbursements for the year by subsidiary and project are detailed as follows:
Company: Forsac SpA Project: Paper Bags for Retail Project - Chillan, Chile. Accounting recognition: Non-current assets, property, plant and equipment Amount disbursed during de period: ThUS$4,149 (ThUS$8,446 accumulated as of December 31, 2020) Amount committed in future years: ThUS$1,453 Estimated final date of disbursements: October, 2021
Disbursements concept: The project involves the acquisition of a machine for the production of paper bags with flexible handles with a nominal production capacity of 36 million bags per year and a new printing machine with a capacity of 600 m/min. The initiative seeks to contribute to the reduction of the consumption of plastic bags.
165 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Company: Papeles Cordillera SpA Project: Cost Savings in MP 20 Project - Puente Alto, Chile. Accounting recognition: Non-current assets, property, plant and equipment Amount disbursed during de period: ThUS306 (ThUS$12,094 accumulated as of December 31, 2020) Amount committed in future years: ThUS$606 Estimated final date of disbursements: March, 2021
Disbursements concept: The project considers a reduction in steam consumption and loss of fiber in the main paper machine of the corrugated cardboard factory in Puente Alto. It is the replacement of trays, water containers, scrapers and coatings of the pressing rollers, among others.
Company: CMPC Tissue S.A. Project: Pollution Reduction Project in Conversion Lines in Personal Care Products - Puente Alto, Chile. Accounting recognition: Non-current assets, property, plant and equipment Amount disbursed during de period: ThUS$544 (ThUS$705 accumulated as of December 31, 2020) Amount committed in future years: ThUS$205 Estimated final date of disbursements: March, 2021
Disbursements concept: Replacement and relocation of air filters in the conversion lines of personal care products of the Puente Alto plant with filtration equipment located outside the production building. Acquisition of equipment to compact the material recovered from the filters with a 40:1 volume reduction.
Company: Melhoramentos CMPC Ltda. Project: Improvement in Effluent Treatment Plant Project - Caieiras, Brazil. Accounting recognition: Non-current assets, property, plant and equipment Amount disbursed during de period: ThUS$3,240 (ThUS$3,378 accumulated as of December 31, 2020) Amount committed in future years: ThUS$13,522 Estimated final date of disbursements: September, 2022
Disbursements concept: Improvement of the effluent treatment plant in the paper mill of Caieiras in order to improve the quality of effluents in the river so that they are well below the new requirements of the National Environment Agency.
166 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
Company: CMPC Pulp SpA Project: Effluent Treatment Plant Improvement Project - Laja, Chile. Accounting recognition: Non-current assets, property, plant and equipment Amount disbursed during de period: ThUS$6,516 (ThUS$32,185 accumulated as of December 31, 2020) Amount committed in future years: ThUS$4,415 Estimated final date of disbursements: December, 2021
Disbursements concept: The project will improve the operational efficiency and quality of liquid discharge in the pulp effluent treatment plant in Laja.
All the projects with committed cash flows are in development as of the date of these financial statements. At CMPC, there are also other projects associated to developing new applied technologies to mitigate impact on the environment.
NOTE 39 - SUBSEQUENT EVENTS AFTER THE REPORTING PERIOD
Although there is much uncertainty about the impact of COVID-19 on the economy, it is expected that the economic recession resulting from COVID-19 will have a significant impact on the demand for goods and services worldwide, being especially serious during the second quarter. However, given that the Company's product mix is mostly essential, the impact on its sales will be less than other industries.
Additionally, the Company's operations may be affected by the emergence of an epidemic, at local level, or even a global pandemic such as the currentCOVID-19 pandemic extended throughout the world. These massive outbreaks may have two major impacts on the Company: health and safety of people and operating continuity and a significant decrease in demand of one of its main products.
For both natural disasters and pandemics, the Company’s management has no influence or control of the event, accordingly, risk management focuses on mitigating such risks, i.e., reducing the impact once the risk materializes. For such purpose, the Company focuses on the emergency, i.e., on the health and safety of people, and on business continuity and that liquidity is available to cope with possible cycles where demand is lower. For example, for COVID-19, where the main committee is led by the Company’s general manager. The main objectives of such committees includes making decisions to ensure the health and safety of people, maintain operating continuity as normally as possible given the circumstances and difficulties posed by the crisis.
The spread of a contagious disease has no direct effect on the Company's property, plant and equipment; accordingly industrial insurance coverages for natural disasters such as earthquakes (and other operational risks), are not applicable for epidemics or pandemics. In such circumstances, complementary health insurance coverage for employees is applicable.
167 | Empresas CMPC S.A. and Subsidiaries Consolidated Financial Statement
There are no other events after the date of issue of these Consolidated Financial Statements that could significantly affect their interpretation.
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